em of Ohio · Ohio, Franklin County, prepared by Clifton Gunderson LLP, for the audit period July...

Comprehensive Annual Financial Report

Fiscal Year Ended June 30, 2011

State Teachers Retirement System of Ohio

88 East Broad Street, Fifth Floor, Columbus, Ohio 43215‐3506 Phone: 614‐466‐4514 or 800‐282‐0370 Fax: 614‐466‐4490

www. auditor.state.oh.us

Retirement Board State Teachers Retirement System of Ohio 275 East Broad Street Columbus, Ohio 43215 We have reviewed the Independent Auditor’s Report of the State Teachers Retirement System of Ohio, Franklin County, prepared by Clifton Gunderson LLP, for the audit period July 1, 2010 through June 30, 2011. Based upon this review, we have accepted these reports in lieu of the audit required by Section 117.11, Revised Code. The Auditor of State did not audit the accompanying financial statements and, accordingly, we are unable to express, and do not express an opinion on them. Our review was made in reference to the applicable sections of legislative criteria, as reflected by the Ohio Constitution, and the Revised Code, policies, procedures and guidelines of the Auditor of State, regulations and grant requirements. The State Teachers Retirement System of Ohio is responsible for compliance with these laws and regulations. Dave Yost Auditor of State January 5, 2012

Prepared through the joint efforts of the STRS Ohio staff.275 E. Broad St., Columbus, OH 43215-3771 • 614.227.4090 • www.strsoh.org

Comprehensive Annual Financial Report

Fiscal Year Ended June 30, 2011

State Teachers Retirement System of Ohio

STRS Ohio Comprehensive Annual Financial Report 20111


Introduction Certificate of Achievement ............................................................................................................................................................1 2010–2011 State Teachers Retirement Board .........................................................................................................................3 STRS Ohio Senior Staff Members ..................................................................................................................................................4 Letter of Transmittal .........................................................................................................................................................................5

Financial Independent Auditor’s Report .....................................................................................................................................................8 Management’s Discussion and Analysis ....................................................................................................................................9 Financial Statements Statements of Plan Net Assets .......................................................................................................................................... 17 Statements of Changes in Plan Net Assets ................................................................................................................... 18 Notes to Financial Statements .......................................................................................................................................... 19 Required Supplementary Information Required Schedule of Pension Plan Funding Progress, 2006–2011 .................................................................... 31 Required Schedule of Employer Contributions Related to Pension Plan, 2006–2011 ................................. 31 Notes to Pension Plan Trend Data ................................................................................................................................... 31 Required Schedule of Health Care Funding Progress, 2007–2011 ....................................................................... 32 Required Schedule of Employer Contributions Related to Health Care, 2007–2011 ..................................... 32 Notes to Health Care Trend Data....................................................................................................................................... 32 Additional Information Schedules of Administrative Expenses .......................................................................................................................... 33 Schedules of Investment Expenses .................................................................................................................................. 34 Schedules of Fees to External Asset Managers by Asset Class ............................................................................... 34

Investments Investment Review ........................................................................................................................................................................ 35 Statement of Investment Objectives and Policy ................................................................................................................. 39 Statement of Fund Governance ................................................................................................................................................. 46 Investment Performance Verification Letter ......................................................................................................................... 48 Investment Performance .............................................................................................................................................................. 49 STRS Ohio Long-Term Policy Objective (20 Years) ............................................................................................................... 49 Summary of Investment Assets as of June 30, 2011 and 2010 ....................................................................................... 50 Investment Distribution by Fair Value as of June 30, 2011 ............................................................................................... 51 Ohio Investment Profile as of June 30, 2011 ......................................................................................................................... 51 Schedule of U.S. Stock Brokerage Commissions Paid ........................................................................................................ 51 Schedule of Largest Investment Holdings as of June 30, 2011 ...................................................................................... 52 Schedule of External Managers as of June 30, 2011........................................................................................................... 53

Actuarial Actuary’s Certification Letter ...................................................................................................................................................... 54 Statement of Actuarial Assumptions and Methods ........................................................................................................... 55 Benefit Recipients Added to and Removed From the Rolls, 2004–2011 ..................................................................... 56 Schedule of Valuation Data — Active Members, 2002–2011 .......................................................................................... 56 Schedule of Valuation Data — Retirees/Beneficiaries, 2002–2011 ............................................................................... 56 Solvency Test, 2002–2011 ............................................................................................................................................................ 57 Analysis of Financial Experience ............................................................................................................................................... 57 Summary of Benefit and Contribution Provisions — Defined Benefit Plan ............................................................... 58 Summary of Benefit and Contribution Provisions — Combined Plan ......................................................................... 60 Summary of Benefit and Contribution Provisions — Defined Contribution Plan ................................................... 62

Statistical Changes in Net Assets, 2002–2011 ........................................................................................................................................... 64 Net Assets by Plan, 2002–2011 .................................................................................................................................................. 65 Benefit Expenses by Type, 2002–2011 ..................................................................................................................................... 65 Actuarial Funded Ratio and Funding Period, 2002–2011 ................................................................................................. 66 Selected Funding Information — Defined Benefit Plan, 2002–2011 ........................................................................... 66 Number of Benefit Recipients by Type, 2002–2011 ............................................................................................................ 66 Summary of Active Membership Data, 2002–2011 ............................................................................................................ 67 Benefit Payments by Type ............................................................................................................................................................ 68 Average Benefit Payments for Service Retirees, 2002–2011 ........................................................................................... 69 Number of Reporting Employers by Type, 2002–2011 ...................................................................................................... 70 Principal Participating Employers ............................................................................................................................................. 70

Professional Consultants: Independent Public Accountants, Clifton Gunderson LLP, Toledo, Ohio; Investment Consultants, Callan Associates Inc., Chicago, Ill., and Cliffwater LLC, Marina del Ray, Calif.; and Actuarial Consultants, PricewaterhouseCoopers (PwC), Chicago, Ill. See Page 53 for a list of external domestic equity, international and fixed-income managers.

Table of ContentsComprehensive Annual Financial Report 2011


2010–2011 State Teachers Retirement Board

Tim Myers, ChairContributing member since 2008.Elida Local Schools, Allen County

James McGreevy, Vice ChairRetired teacher member since 2009.

Craig C. BrooksAppointed jointly by the Speaker of the House of Representatives and the Senate President in 2008.

Regina F. BurchAppointed by the Governor of Ohio in 2008.

John ChildsRepresenting Stan Heffner, Superintendent of Public Instruction. Ex officio member of the board since appointed to office in 2011.

Carol CorrethersContributing member since 2009.Lorain City Schools, Lorain County

Taiyia L. HaydenContributing member since 2006.Columbus City Schools, Franklin County

Mark HillContributing member since 2010.Worthington City Schools, Franklin County

Daniel J. MartinAppointed by the Treasurer of State in 2010.

Bob SteinRetired teacher member since 2009.

Dale PriceContributing member since 2010.Toledo Public Schools, Lucas County

Michael J. NehfExecutive Director State Teachers Retirement System of Ohio

Guiding the members of the Retirement Board is their collective belief that Ohio’s public educators deserve comprehensive benefits and quality service from their retirement system during their careers and in retirement. The Retirement Board provides the direction, fiduciary oversight and policies that enable STRS Ohio to fulfill its mission of partnering with STRS Ohio members in providing financial performance and member service that assures financial security for current and future retirees. The Retirement Board is composed of 11 members as follows: five elected contributing members; two elected retired members; an investment expert appointed by the governor; an investment expert appointed jointly by the speaker of the Ohio House of Representatives and the Ohio Senate president; an investment expert designated by the treasurer of state; and the superintendent of public instruction or his designated investment expert. These individuals devote hundreds of volunteer hours in service to STRS Ohio. In January 2010, Dr. Daniel J. Martin was appointed to the board by the treasurer of state. In May, Mark Hill and Dale Price were elected to the State Teachers Retirement Board. These two individuals took their seats on the board on Sept. 1, 2010, and serve a four-year term through Aug. 31, 2014. Hill and Price filled contributing member seats vacated by Conni Ramser and Mark Meuser. In February, John Childs joined the board, representing the Superintendent of Public Instruction. In May, Taiyia (Tai) Hayden was reelected to the board to serve a four-year term through Aug. 31, 2015.In June, Mark Hill was elected as vice chair and James McGreevy assumed the responsibility of board chair, effective Sept. 1, 2011. Also in June, Senior Staff member Laura Ecklar retired after directing the communications and public relations efforts of STRS Ohio for 13 years. Nick Treneff was selected to replace Ecklar.

STRS Ohio Comprehensive Annual Financial Report 2011 4

STRS Ohio Senior Staff MembersMichael J. Nehf, Executive Director

Sandra L. Knoesel, Deputy Executive Director — Member Benefits

Stephen A. Mitchell, Deputy Executive Director — Investments

Robert A. Slater, Deputy Executive Director — Finance and Chief Financial Officer

Terri Meese Bierdeman, Director, Governmental Relations

Eileen F. Boles, Retirement Board Liaison

Andrew J. Marfurt, Director, Human Resource Services

William J. Neville, General Counsel

David Tackett, Chief Audit Executive, Internal Audit

Gregory A. Taylor, Director, Information Technology Services

Nicholas J. Treneff, Director, Communication Services

STRS Ohio Mission and Vision The mission of STRS Ohio is: To partner with STRS Ohio members in providing financial performance and member service that assures financial security for current and future retirees.

The vision of STRS Ohio is: To be a premier retirement system as evidenced by:

Comprehensive member benefits: Providing retirement planning, benefits and health care coverage to enhance the quality of life for members, and

Quality service: Striving to exceed the service expectations of members, employers and associates,

through

Fiduciary responsibility: Safeguarding members’ financial retirement security using ethical and professional business practices, and

Financial performance: Improving funding through prudent investments and resource management,

by

Empowerment of associates: Enabling associates to act through the delegation of authority and the acceptance of accountability, and

Organizational renewal: Enhancing STRS Ohio’s future by continually acquiring, sharing and implementing new knowledge.

STRS Ohio Guiding PrinciplesTo achieve our mission and vision, we will:

1. Make decisions that produce the greatest possible net benefit for members.

2. Be proactive rather than reactive by anticipating and dealing with change and growth.

3. Attract, develop and retain a highly competent and motivated workforce.

4. Build an organizational culture that inspires a high level of professionalism and performance — distinguishing STRS Ohio as a workplace now and in the future.

5. Provide an open environment for associates to generate new methods or practices to achieve our vision.

6. Provide associates with authority commensurate with their responsibilities for efficiency in decision-making and leadership development.

7. Continually improve through research, development and evaluation.


Dec. 5, 2011

Members of the State Teachers Retirement Board:

We are pleased to present the Comprehensive Annual Financial Report of the State Teachers Retirement System of Ohio for the fiscal year ended June 30, 2011. This report is intended to provide financial, investment, actuarial and statistical information in a single publication. STRS Ohio management is responsible for the accuracy of the data, as well as the completeness and fairness of the presentation.

STRS Ohio was created by legislative act on May 8, 1919, as an alternative to separate, often unstable local school district retirement plans. STRS Ohio is a cost-sharing, multiple-employer plan providing service retirement, disability and survivor benefits to teachers and faculty members of public boards of education, state-supported colleges and universities, and the state of Ohio and its political subdivisions. Optional health care coverage is available to eligible benefit recipients and their eligible family members.

More analysis and information of the financial activities of STRS Ohio can be found in the Management’s Discussion and Analysis section that begins on Page 9 of this report.

Major InitiativesThe State Teachers Retirement Board is awaiting passage of multifaceted legislative changes to strengthen the financial condition of the retirement system. Without these changes, STRS Ohio will eventually be unable to pay benefits. These reforms enable the Retirement Board and staff to meet their fiduciary responsibility to help ensure the long-term solvency of STRS Ohio. This plan, as well as recommended changes from the other Ohio state pension systems, is on hold until completion of an independent actuarial review requested by the Ohio Retirement Study Council.

The Retirement Board continues to annually review the actuarial valuations of the pension fund and the health care fund to monitor financial progress over time. The board also continues to work with its many constituents as discussions continue with the other Ohio systems, the Ohio Retirement Study Council and members of the Ohio Legislature in pursuit of legislation to implement these changes. Following are the proposed changes:

Change in Eligibility for Retirement Beginning Aug. 1, 2015— Increases age and service requirements for retirement.

Age and service requirements for retirement would increase to a minimum age 60 with 35 years of service. (Members may currently retire at any age with 30 years.) This change would be phased in based on the following timeline:

Age 56 with 31 years beginning Aug. 1. 2015, and retiring by July 1, 2017 Age 57 with 32 years beginning Aug. 1, 2017, and retiring by July 1, 2019 Age 58 with 33 years beginning Aug. 1, 2019, and retiring by July 1, 2021 Age 59 with 34 years beginning Aug. 1, 2021, and retiring by July 1, 2023 Age 60 with 35 years retiring Aug. 1, 2023, and later

Members may still also retire at age 65 with a minimum of five years of service.

Currently, STRS Ohio members may retire early with a reduced benefit at age 55 with 25 years of service. The service requirement for a now actuarially reduced benefit would be increased to 30 years of service. This change would also be phased in based on the following timeline:

Age 55 with 26 years beginning Aug. 1, 2015, and retiring by July 1, 2017 Age 55 with 27 years beginning Aug. 1, 2017, and retiring by July 1, 2019 Age 55 with 28 years beginning Aug. 1, 2019, and retiring by July 1, 2021 Age 55 with 29 years beginning Aug. 1, 2021, and retiring by July 1, 2023 Age 55 with 30 years retiring Aug. 1, 2023, and later

Members may also still retire at a minimum age 60 with five years of service, but the benefit would be actuarially reduced beginning Aug. 1, 2015.

Change in Benefit Formula Beginning Aug. 1, 2015— New formula would be 2.2% for all years of service.

Teachers retiring with 35 years of service at age 60 or older would receive 77% of their final average salary as a pension.

The current 35-year enhanced benefit formula would be eliminated. Those who have 30 years of service; who are age 55 with 25 years of service; or who are age 60 with five years of service as of July 1, 2015, would receive the greater of:

(a) The benefit as of July 1, 2015, under the current formula; or (b) The benefit upon retirement under the new formula.

In short, members who are eligible for service retirement would receive no less of a base pension benefit than they could have received on July 1, 2015.


Increase in Final Average Salary (FAS) Years Beginning Aug. 1, 2015— FAS calculation would be based on the five highest years of earnings.

Pension benefits are determined by a member’s age, years of service and FAS; the current FAS period is three years.

Reduction in Cost-of-Living Adjustment (COLA) Beginning July 1, 2012— Beginning July 1, 2012, current retirees would receive an annual 2% COLA; members retiring Aug. 1, 2012, and later would also receive a 2% COLA, but it will not begin until 60 months after the date of retirement.

Currently, the COLA is 3%; both current and proposed COLAs are a fixed-dollar amount each year, not compounded.

Increase in Member Contributions Beginning July 1, 2012— Increase member contributions by 3%, phased in 1% per year beginning July 1, 2012, through July 1, 2014.

Currently, STRS Ohio members pay 10% of their salary to STRS Ohio in lieu of paying into Social Security. In the pension legislation, the Retirement Board will seek language that gives the board discretion to seek up to a total of 14% in member contributions. To achieve the 30-year funding period, the board’s plan calls for only a 3% contribution increase phased in over three years. Authority for up to a 4% increase would give the board flexibility to address future funding experience.

The Retirement Board and staff also continued to focus on ways to help STRS Ohio members stretch their health care dollars, as well as extend the life of the health care fund that supports the STRS Ohio Health Care Program. A positive return on fund assets, as well as the addition of a Medicare Advantage program and other plan changes, helped to slightly lengthen the solvency period for the health care fund as of Jan. 1, 2011. However, without significant changes in premiums, program eligibility or plan design, the program cannot survive in the long term. The board has begun work on a strategic plan for health care and changes to the plan will be implemented Jan. 1, 2012.

InvestmentsTotal investments (including short-term investments) increased to $68.0 billion as of June 30, 2011. The Investment Review starting on Page 35 discusses the investment environment during fiscal 2011. The allocation of investment assets is designed to provide high long-term yields at optimal risk consistent with the expected long-term rate of return. A summary of the asset allocation can be found on Page 50.

For the fiscal year ended June 30, 2011, investments returned 22.59%. STRS Ohio’s annualized rate of return was 2.93% over the last three years and 4.48% for the last five years. Similar benchmark returns over the same one-, three- and five-year periods were 22.36%, 3.32% and 4.42%, respectively.

2011 Additions to Plan Net Assets Member and employer contributions, as well as income from investments, provide funds for pension benefits and health care coverage. Employer contributions include amounts paid by employers of participants in alternative retirement plans (ARPs). ARP participants are not members of STRS Ohio; however, their employers are required to contribute 3.5% of salaries to STRS Ohio to help pay for unfunded liabilities. Effective Jan. 1, 2006, STRS Ohio began receiving Medicare Part D reimbursements for participant prescription costs. Fiscal 2011 included $40.9 million in Medicare Part D reimbursements. STRS Ohio participated in the Early Retiree Reinsurance Program (ERRP) beginning in fiscal year 2011. This government program reimburses employers for pre-Medicare health care costs until 2014, or until the federal funding is extinguished. For fiscal 2011, STRS Ohio received $29.7 million of ERRP reimbursements. These federal subsidies help offset the overall cost of managing the post-employment health care program. Total additions to plan net assets were $15.6 billion in fiscal 2011.

2011 Deductions From Plan Net AssetsThe principal purpose for STRS Ohio is to provide retirement, survivor and disability benefits to qualified members and their beneficiaries. Benefit payments, including refunds to terminated members, totaled $6.0 billion. Refunds increased by 30.7% from fiscal year 2010, as more members terminated employment and more reemployed retirees took lump-sum payments instead of a second benefit payment.

Deductions From Plan Net Assets (in thousands)

2011

Benefits $ 5,848,863 Withdrawals 166,020 Administrative Expenses 61,202

Total Deductions From Net Assets $ 6,076,085

Additions to Plan Net Assets (in thousands)

2011

Net Investment Income $ 12,622,935 Contributions: Member 1,129,893 Employer 1,511,003 Health Care Premiums 222,130 Government Reimbursements 70,556 Other 29,646 Total Contributions 2,963,228

Total Additions to Plan Net Assets $ 15,586,163


FundingContribution rates are intended to provide a level basis of funding using the entry age normal cost method, and an actuarial valuation is performed annually by PricewaterhouseCoopers, Chicago, Ill. The July 1, 2011, valuation shows that the amortization period for the unfunded accrued liability remained at infinity from the prior year, and the ratio of assets to total accrued liabilities decreased to 58.8% from 59.1%. Contribution rates are insufficient to sustain current benefits.

Generally accepted accounting principles require pension plans to report annual required contributions at the amount necessary to have a maximum amortization period of 30 years. Consequently, the amortization period shown on Page 31 is 30 years for financial reporting purposes.

A detailed discussion of funding is provided in the Actuarial Section of this report beginning on Page 54.

Internal ControlsSTRS Ohio management is responsible for and has implemented internal controls designed to provide reasonable assurances for the safeguarding of assets and the reliability of financial records. Internal controls provide reasonable, not absolute, assurance that the objectives of the organization will be met. We believe that the internal controls currently in place adequately meet the purpose for which they were intended.

Certificate of Achievement and Other AwardsThe Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to STRS Ohio for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2010. The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government financial reports.

To be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report that conforms to program standards. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for one year. STRS Ohio has received a Certificate of Achievement for the last 21 years. We believe our current report continues to meet the Certificate of Achievement program requirements and will be submitted to the GFOA.

In addition, the Public Pension Coordinating Council (PPCC) presented STRS Ohio with the 2011 Public Pension Standards Award for Administration in recognition of meeting professional standards set forth in the Public Pension Standards. PPCC is a coalition made up of the National Association of State Retirement Administrators (NASRA), the National Council on Teacher Retirement (NCTR) and the National Conference on Public Employee Retirement Systems (NCPERS).

STRS Ohio also received the “Making Your Tax Dollars Work” award from the Auditor of State’s Office for the third consecutive year. STRS Ohio received the award for the quality of its financial reporting and the absence of audit issues. Less than 5% of the 5,500 entities that the Auditor of State’s Office audits each year receive this award.

AcknowledgmentsThe preparation of this report is possible only through the combined efforts of the STRS Ohio staff. It is intended to provide complete and reliable information as a basis for making management decisions, complying with legal provisions and determining responsible stewardship of the assets contributed by members and their employers.

Respectfully submitted,

Michael J. Nehf Executive Director

Robert A. Slater, CPA Deputy Executive Director Chief Financial Officer


Management’s Discussion and Analysis

Management is pleased to provide this overview and analysis of the financial activities of the State Teachers Retirement System of Ohio (STRS Ohio) for the years ended June 30, 2011 and 2010. This information is intended to supplement the financial statements, which begin on Page 17 of this report. We encourage readers to consider additional information and data in this 2011 Comprehensive Annual Financial Report.

As of June 30, 2011, STRS Ohio held $66.8 billion in trust on behalf of nearly 475,200 active, inactive and retired educators. This represented a $9.5 billion increase from the previous fiscal year-end. In fiscal 2010, STRS Ohio experienced a $4.2 billion increase from the previous fiscal year-end. Although 2011 was the highest year-end return since 1983, it does not alleviate the system’s need for the comprehensive pension reform presented to the Ohio Legislature. Pension legislation (S.B. 3 and H.B. 69) introduced in 2011 has been put on hold while the Ohio Retirement Study Council (ORSC) seeks input from an outside consultant on the proposals for pension plan design changes that were presented by Ohio’s five statewide public retirement systems.

Before the 2008 investment market downturn, STRS Ohio had a funding period for its pension fund of 41.2 years, exceeding state statute’s 30-year maximum funding period. In just one year, from July 2008 to July 2009, STRS Ohio’s unfunded liability more than doubled and the funding period became “infinite.” Economic and demographic factors, such as members living longer, were causing a reduction in available funds to satisfy benefit obligations over time. The unprecedented decline in the global markets and the accompanying recession, along with the projected gradual economic recovery, significantly accelerated the need for STRS Ohio to make changes. The funding period remains at infinity at July 1, 2011, and the unfunded liability is now $40.7 billion.

STRS Ohio first proposed plan design changes in 2009 to strengthen the financial condition of the retirement system following the recession. That plan was revised in January 2011 and several hearings were held in both the Ohio House and Senate during the winter and into the spring. The plan adopted by the board calls for increases in member contributions; longer final average salary period; change in eligibility for retirement; change in the benefit formula; and reduction in the annual cost-of-living adjustment. The plan complies with the Ohio statutory requirement to bring the pension fund to a 30-year funding period.

STRS Ohio has the cash flow needed to pay current pension benefits when due. In fact, the value of preserving the security of the Defined Benefit Plan to our members has never been more apparent. However, looking long term, there is a shortfall in the funding of STRS Ohio benefits. If no changes are made, STRS Ohio will eventually be unable to pay benefits.

Financial HighlightsThe chart below illustrates the percentage changes in plan assets and expenses for fiscal 2011. Highlights of the fiscal year include:

• The investment rate of return was 22.59% in fiscal 2011. The investment rate of return for fiscal 2010 was 13.54% following a –21.66% return in 2009. Five- and 10-year total fund annualized returns are 4.48% and 5.81%, respectively.

• Plan net assets increased 16.6% from the prior fiscal year, ending at $66.8 billion as of June 30, 2011. Plan net assets increased 8.0% from fiscal 2009 to fiscal 2010, ending at $57.3 billion as of June 30, 2010.

• The post-employment health care balance was $3.2 billion as of June 30, 2011, an increase of 14.2% from the prior fiscal year. Net investment income for the fund was $609 million in 2011. The post-employment health care balance increased 4.4% from fiscal 2009 to fiscal 2010, ending at $2.8 billion as of June 30, 2010.

• Defined contribution accounts finished the year with $519 million in net assets, an increase of 35.3% from 2010. The defined contribution accounts ended at June 30, 2010, with $384 million in assets, an increase of 29.2% from fiscal 2009.

• Total benefit payments were $5.8 billion during fiscal 2011, an increase of 6.5% from fiscal 2010. STRS Ohio paid members $5.2 billion in service retirement, disability and survivor benefits plus $604 million for health care coverage during fiscal 2011. Total benefit payments were $5.5 billion during fiscal 2010, an increase of 6.2% from fiscal 2009.

Plan NetAssets

ServiceRetirement, Disability

and Survivor Benefits

HealthCareCostsPaid

AdministrativeExpenses

InvestmentExpenses

16.6%

2.0%

14.9%

7.0%

–1.0%

20%18%16%14%12%10%

8%6%4%2%0%

–2%–4%

Percentage Changes in Plan Assets and Expenses for Fiscal 2011



• Total additions to plan net assets were $15.6 billion during fiscal 2011. Net investment income during fiscal 2011 totaled $12.6 billion. Total additions to plan net assets were $9.9 billion during fiscal 2010.

Historical Plan Asset Additions and Deductions(years ended June 30)

Percentage 2011 2010 Change

Employer Contributions $ 1,511,003 $ 1,505,101 .39%

Member Contributions 1,129,893 1,112,542 1.56%

Health Care Premiums and Government Reimbursements 292,686 260,472 12.37%

Other 29,646 23,277 27.36%

Total Revenue $ 2,963,228 $ 2,901,392 2.13%

Benefits and Administration Years Ended June 30, 2011 and 2010 (dollar amounts in thousands)

Percentage 2011 2010 Change Benefits (includes optional health care) $ 5,848,863 $ 5,492,834 6.48%

Refunds 166,020 126,981 30.74%

Administration 61,202 61,808 –0.98%

Total Expenses $ 6,076,085 $ 5,681,623 6.94%

Contributions Years Ended June 30, 2011 and 2010 (dollar amounts in thousands)

Total Deductions

Total Additions

Thousands

$17,000,000

$15,000,000

$13,000,000

$11,000,000

$9,000,000

$7,000,000

$5,000,000

$3,000,000

$1,000,000

–$1,000,000

–$3,000,000

–$5,000,000

–$7,000,000

–$9,000,000

–$11,000,000

–$13,000,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

• Member and employer contributions totaled $2.6 billion during fiscal 2011. Total covered payroll, which is the combined salaries for all plan participants, increased 0.36%. During fiscal 2010, member and employer contributions totaled $2.6 billion.

• Administrative expenses decreased 1.0% to $61.2 million for fiscal 2011. Investment expenses, which include salaries and benefits for investment personnel, increased 14.9% to $35.9 million in fiscal 2011. In fiscal 2010, administrative expenses decreased 0.8% and investment expenses decreased 10.6%.

Annual Financial Review The combined portfolio delivered a 22.59% rate of return in fiscal 2011. Domestic stocks led all investment categories by generating a 33.18% return. International equity had a 24.16% return and real estate was 22.66%. Alternative investments had a 20.43% return and the fixed-income return was 5.18%. Annualized investment return for the past 10 fiscal years was 5.81%.

The unfunded pension liability for STRS Ohio as of July 1, 2011, is $40.7 billion, up from $38.8 billion as of July 1, 2010. As a result, accrued liabilities and future benefits will not be sustainable without plan design changes or additional revenues. The amortization period at July 1, 2011 and 2010, respectively, was infinite. The funded ratio at July 1, 2011, was 58.8%, a decrease from 59.1% at July 1, 2010. STRS Ohio recorded a net actuarial gain of $181 million for fiscal 2011. The funded ratio of the post-employment health care fund is 36.0% and 26.1% as of Jan. 1, 2011 and 2010, respectively.

Historical additions to and deductions from plan assets indicate a pattern of steadily increasing deductions compared to fluctuating additions due to investment volatility, as shown in the chart at the top of the page. Changes in contributions and benefits and administration for fiscal years ended June 30, 2011 and 2010, are shown in the charts to the left. Pension benefit payments and health care costs exceed member and employer contributions. STRS Ohio is dependent upon investment income to compensate for the difference between benefit payments and contributions over time.



Investment market improvements increased the net assets for post-employment health care to $3.2 billion at June 30, 2011, from $2.8 billion at June 30, 2010. Modifications were made to the health care program for calendar year 2010, including introduction of a Medicare Advantage plan administered by Aetna. Premiums received from health care recipients in fiscal 2011 decreased slightly to $222.1 million from $222.3 million in fiscal 2010. Medicare Part D reimbursements of $40.9 million were received to help offset prescription drugs costs. Receipts from participation in the Early Retiree Reinsurance Program (ERRP) totaled $29.7 million in 2011. ERRP is a government program started in fiscal 2011 to reimburse employers for a portion of pre-Medicare health care costs. Health care coverage payments grew 2.0% from fiscal 2010. In fiscal 2010, health care premiums decreased to $222.3 million from $225.6 million. Health care coverage payments grew 6.1% from fiscal 2009.

Payment of performance incentives that had been deferred from previous years caused investment administrative expenses to increase $4.7 million in fiscal 2011 from fiscal 2010.

Overview of the Financial Statements of STRS OhioThe two basic financial statements are the Statements of Plan Net Assets and the Statements of Changes in Plan Net Assets. Amounts are shown for the most recent and previous fiscal years for comparison and analysis of changes in individual line items. The statements are prepared in conformity with generally accepted accounting principles.

The Statements of Plan Net Assets are a measure of STRS Ohio’s assets and liabilities at the close of the fiscal year. Total assets less current liabilities equal net assets held in trust for future benefits.

The Statements of Changes in Plan Net Assets show additions and deductions for the fiscal year. The net increase (or decrease) is the change in net assets available for benefits since the end of the previous fiscal year.

For financial reporting purposes, STRS Ohio assets are divided into three primary funds: the Defined Benefit (DB) Plan, the Defined Contribution (DC) Plan and Post-employment Health Care.

• The Defined Benefit Plan is the largest fund and includes member contributions, employer contributions and investment earnings for DB participants. The DB Plan pays service retirement benefits using a fixed formula based on age, years of service and salary. In addition to service retirement, DB participants are eligible for disability and survivor benefits.

• The Defined Contribution Plan began on July 1, 2001. It is an optional plan available to new members. DC participants allocate both member and employer contributions in investment choices provided by STRS Ohio. Benefits are based on the member’s account value.

As an alternative to the Defined Benefit or Defined Contribution Plan, new members may elect the Combined Plan. Combined Plan participants allocate their member contributions among the same investment choices as DC members, and employer contributions are used to provide a reduced formula service retirement benefit along with disability and survivor protection. Assets to provide benefits to Combined Plan members are divided between the Defined Benefit Plan and the Defined Contribution Plan.

• Net assets for post-employment health care consist of funds set aside to subsidize optional health care coverage for members enrolled in the Defined Benefit and Combined Plans.

The Notes to Financial Statements are a fundamental part of the financial statements and provide important information to augment the figures in the financial statements. The notes describe accounting policies along with plan membership and benefits. Supplementary disclosures of selected financial data are included in the notes.

In addition to the basic financial statements and footnotes, a Schedule of Pension Plan Funding Progress, a Schedule of Employer Contributions Related to Pension Plan and Notes to Pension Plan Trend Data are included as “required supplementary information.” These schedules emphasize the long-term nature of pension plans and the status of STRS Ohio in accumulating sufficient assets to pay benefits when due.

The Schedule of Pension Plan Funding Progress shows actuarial trend information for the past six years. It includes the ratio of valuation assets to actuarial accrued liability (funded ratio). The funded ratio increases over time as the funding status



Domestic Equities: $ 24,406,336 35.90%

Fixed Income: $ 13,218,397 19.44%

International: $ 12,955,372 19.05%

Real Estate: $ 7,124,675 10.48%

Alternative Investments: $ 5,920,652 8.71%

Short-Term Investments: $ 4,367,154 6.42%

Total Investments: $67,992,586

Investment Distribution by Fair Value — as of June 30, 2011 (dollar amounts in thousands)

Investment Performance (total returns, annualized on a fiscal-year basis, July 1–June 30)

1-Year Returns (2011)1

Asset Category STRS Ohio Return Index Name Index Return Domestic Equities 33.18% Russell 3000 32.37% International 24.16% International Equity Blended Benchmark2 23.38% Fixed Income 5.18% Barclays Capital U.S. Universal Index 4.78% Real Estate 22.66% Real Estate Blended Benchmark3 19.46% Alternative Investments 20.43% Alternative Investment Blended Benchmark4 –

Total Fund 22.59% Total Fund Blended Benchmark5 22.36%

5-Year Returns (2007–2011) Asset Category STRS Ohio Return Index Name Index Return Domestic Equities 3.15% Russell 3000 3.35% International 3.78% International Equity Blended Benchmark2 3.18% Fixed Income 7.44% Barclays Capital U.S. Universal Index 6.61% Real Estate 6.03% Real Estate Blended Benchmark3 3.96% Alternative Investments 8.64% Alternative Investment Blended Benchmark4 5.94%

Total Fund 4.48% Total Fund Blended Benchmark5 4.42% STRS Ohio Long-Term Policy Objective (20 Years) Total Fund: 8.10%

Investment performance is calculated using a time-weighted rate of return.1The one-year returns for the fiscal years ended June 30, 2011, 2010, 2009, 2008 and 2007, have been examined by Vincent Performance Services LLC. A copy of the examination report is available upon request.2The International Equity Blended Benchmark is calculated using 80% of the MSCI World ex USA Index (50% hedged) and 20% of the MSCI EMF Index.3The Real Estate Blended Benchmark is calculated quarterly using 85% NCREIF Property Index (NPI) and 15% Wilshire REIT Index for all periods beginning on or after Oct. 1, 2007, and 80% NPI, 10% NCREIF Timberland Index and 10% Dow Jones Wilshire REIT Index for periods prior to Oct. 1, 2007. 4The Alternative Investment Blended Benchmark is calculated monthly using 62.5% of the Russell 3000 Index plus 3% and 37.5% of the Russell 3000 Index minus 1% effective July 1, 2010; 71.4% of the Russell 3000 Index plus 3% and 28.6% of the Russell 3000 Index minus 1% effective July 1, 2009; and the Russell 3000 Index plus 3% for periods prior to July 1, 2009. Given the long-term nature of the asset class, no benchmark return for alternative investments is displayed for the one-year period.5The Total Fund Blended Benchmark is calculated and rebalanced monthly using a blend of the asset class benchmarks based on the Total Fund’s policy weights in effect during the respective period. For alternative investments, however, the actual alternative investments return is used in the calculation of the Total Fund Blended Benchmark. Information concerning asset class benchmarks and policy weights is available upon request.



of a pension plan improves and vice versa. The Schedule of Pension Plan Funding Progress also shows the unfunded actuarial accrued liability as a percentage of member payroll. This percentage decreases as a pension plan grows financially stronger.

The Schedule of Employer Contributions Related to Pension Plan shows the amount of required employer contributions determined in accordance with parameters established by Governmental Accounting Standards Board (GASB) Statement No. 25 and the percentage actually contributed. Employers have met their obligation by contributing at the legally required contribution rates for each of the six years shown in the schedule.

The Notes to Pension Plan Trend Data provide the actuarial method and assumptions used to determine the data in the Schedule of Pension Plan Funding Progress and the Schedule of Employer Contributions Related to Pension Plan.

A separate Schedule of Health Care Funding Progress, Schedule of Employer Contributions Related to Health Care and Notes to Health Care Trend Data are included as required by GASB Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. The health care information shows the status of STRS Ohio in accumulating sufficient assets to pay health care coverage costs.

Schedules of Administrative Expenses, Schedules of Investment Expenses and Schedules of Fees to External Asset Managers by Asset Class are included to detail the administrative and investment costs to operate STRS Ohio.

Investment Allocation and Fiscal Year PerformanceFor fiscal 2011, the rate of return for total investments was 22.59%. The relative benchmark for STRS Ohio returned 22.36%. The target allocations at June 30, 2011, were 1% liquidity reserves, 19% fixed income, 39% domestic stock, 23% international, 10% real estate and 8% in alternative investments. Amounts actually invested in these categories at the end of June 2011 represent an investment over/underweight if different from the target allocation. Over/underweighting occurs as fair values change and as investment managers determine allocation

entry and exit timing strategies. See Page 12 for detailed investment performance.

External asset management fees are shown separately in the Statements of Changes in Plan Net Assets as a reduction of investment income. Coupled with direct internal investment costs, the cost to manage investments was $176 million in 2011 and $161 million in 2010.

Financial Statement AnalysisThe tables on Page 14 show condensed information from the Statements of Plan Net Assets and the Statements of Changes in Plan Net Assets.

The plan net assets increased 16.6% from fiscal 2010. The plan net assets increased 8.0% from fiscal 2009. The fluctuation of plan net assets for both fiscal 2011 and 2010 was primarily due to changes in the fair value of investments.

The value of capital assets decreased from 2010 because depreciation expense in fiscal 2011 exceeded the cost of new capital items.

Total investment income increased by $5.6 billion from fiscal 2010. Total investment income for fiscal 2010 increased by more than $22 billion from fiscal 2009.

Employer contributions increased 0.4% based on statewide covered payroll. Employer contributions increased 2.0% in fiscal 2010. Member contributions increased 1.6% in fiscal 2011 and 2.5% in fiscal 2010. Member and employer rates remained at 10% and 14%, respectively, of earned compensation for fiscal 2010 and 2011.

Health care premiums helped offset some of the increases in health care costs. Of the $604.5 million paid to health care providers in fiscal 2011, health care enrollees paid $222.1 million through premium deductions. Health care enrollees were also responsible for additional health care costs paid through deductibles, coinsurance, copayments and other out-of-pocket expenditures. Employer contributions of $103.7 million and government reimbursements of $70.6 million helped pay health care costs. The remaining health care costs of $208.1 million were paid from accumulated net assets held for post-employment health care. For



Deductions From Plan Net Assets (dollar amounts in thousands)

Amount Increase (Decrease) Percentage Change 2011 2010 2009 From 2010 to 2011 From 2010 to 2011 Deductions: Benefit payments $ 5,229,494 $ 4,888,908 $ 4,603,388 $ 340,586 6.97% Health care coverage 604,456 592,416 558,344 12,040 2.03% Refunds to members 166,020 126,981 129,290 39,039 30.74% Administrative expenses 61,202 61,808 62,284 (606) –0.98% Other 14,913 11,510 10,363 3,403 29.57% Total deductions $ 6,076,085 $ 5,681,623 $ 5,363,669 $ 394,462 6.94%

Additions to Plan Net Assets (dollar amounts in thousands)

Amount Increase (Decrease) Percentage Change 2011 2010 2009 From 2010 to 2011 From 2010 to 2011

Contributions: Member contributions $ 1,129,893 $ 1,112,542 $ 1,085,738 $ 17,351 1.56% Employer contributions 1,511,003 1,505,101 1,475,835 5,902 0.39% Health care premiums 222,130 222,316 225,627 (186) –0.08% Other 100,202 61,433 58,636 38,769 63.11% Total contributions 2,963,228 2,901,392 2,845,836 61,836 2.13% Net investment income (loss) 12,622,935 7,028,984 (15,209,520) 5,593,951 79.58% Total additions to plan net assets $ 15,586,163 $ 9,930,376 $ (12,363,684) $ 5,655,787 56.95%

Plan Net Assets (dollar amounts in thousands)

Amount Increase (Decrease) Percentage Change 2011 2010 2009 From 2010 to 2011 From 2010 to 2011 Cash and investments $ 67,997,923 $ 58,773,588 $ 54,739,893 $ 9,224,335 15.69%Receivables 766,081 746,461 1,301,366 19,620 2.63%Securities lending collateral 718,885 616,686 1,542,050 102,199 16.57%Capital assets 116,475 121,830 125,597 (5,355) –4.40% Total assets 69,599,364 60,258,565 57,708,906 9,340,799 15.50% Liabilities 2,767,510 2,936,789 4,635,883 (169,279) –5.76% Plan net assets $ 66,831,854 $ 57,321,776 $ 53,073,023 $ 9,510,078 16.59%

Change in Net Assets From Plan Additions and Deductions(dollar amounts in thousands)

Amount Increase 2011 2010 2009 From 2010 to 2011 Change in plan net assets $ 9,510,078 $ 4,248,753 $ (17,727,353) $ 5,261,325


fiscal 2010, benefit recipients and employers contributed $222.3 million and $103.4 million, respectively.

STRS Ohio was created to provide retirement, disability and survivor benefits to members and eligible beneficiaries. Expenditures include monthly payments to eligible recipients, refunds of contributions to members who terminate employment, and administrative costs of operating STRS Ohio.

Total deductions from plan net assets were $6.1 billion in fiscal 2011, a 6.9% increase over fiscal 2010. Total deductions from plan net assets were $5.7 billion in fiscal 2010, a 5.9% increase over fiscal 2009. The largest component was monthly benefit payments for service retirement, disability and survivor benefits. Total pension benefit payments increased 7.0% in fiscal 2011 and 6.2% in fiscal 2010 as a result of new retirees and cost-of-living adjustments.

Health care costs increased 2.0% in fiscal 2011 and 6.1% in fiscal 2010.

Funding AnalysisThe unfunded accrued liability for STRS Ohio pension benefits was $40.7 billion as of July 1, 2011, up from $38.8 billion at July 1, 2010. Market changes in investment assets are smoothed over a four-year period for valuation purposes, except that the actuarial value of assets shall not be less than 91% nor more than 109% of market value. Valuation assets ended fiscal 2011 at $58.1 billion, up from $55.9 billion the prior year. The present value of promised benefits to current and future benefit recipients (the actuarial accrued liability) at fiscal 2011 and 2010 was $98.8 billion and $94.7 billion, respectively. The funded ratio, which is valuation assets divided by actuarial accrued liability, was 58.8% at July 1, 2011, down from 59.1% at July 1, 2010. In fiscal 2011, the funding period remained infinite.

Requests for InformationQuestions about any information provided in this report should be addressed to:

State Teachers Retirement System of Ohio ATTN: Chief Financial Officer 275 E. Broad St. Columbus, OH 43215-3771



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Financial

Statements of Plan Net Assets (in thousands)

June 30, 2011 June 30, 2010 Post- Post- Defined Defined employment Defined Defined employment Benefit Contribution Health Care Totals Benefit Contribution Health Care Totals

Assets: Cash and short-term investments $ 4,089,095 $ 75,024 $ 208,372 $ 4,372,491 $ 2,908,761 $ 66,339 $ 151,821 $ 3,126,921 Receivables: Accrued interest and dividends 157,749 8,039 165,788 125,771 6,564 132,335 Employer contributions 238,279 23 12,142 250,444 239,424 28 12,497 251,949 Retirement incentive 1,588 1,588 2,887 2,887 Member contributions 147,126 53 147,179 148,181 57 148,238 Due from defined contribution plans 428 428 7,055 7,055 Securities sold 188,954 9,629 198,583 192,134 10,028 202,162 Miscellaneous receivables 2,071 2,071 1,835 1,835 Total receivables 736,195 76 29,810 766,081 717,287 85 29,089 746,461 Investments, at fair value: Fixed income 12,483,491 98,773 636,133 13,218,397 13,278,379 87,078 693,055 14,058,512 Domestic common and preferred stock 22,993,453 241,184 1,171,699 24,406,336 18,404,936 164,562 960,630 19,530,128 International 12,270,559 59,530 625,283 12,955,372 10,690,562 41,897 557,986 11,290,445 Real estate 6,736,361 45,043 343,271 7,124,675 6,275,635 30,906 327,553 6,634,094 Alternative investments 5,633,577 287,075 5,920,652 3,928,446 205,042 4,133,488 Total investments 60,117,441 444,530 3,063,461 63,625,432 52,577,958 324,443 2,744,266 55,646,667 Invested securities lending collateral 684,028 34,857 718,885 586,096 30,590 616,686 Capital assets, at cost, net of accumulated depreciation of $119,657 and $112,898, respectively 116,475 116,475 121,830 121,830 Total assets 65,743,234 519,630 3,336,500 69,599,364 56,911,932 390,867 2,955,766 60,258,565 Liabilities: Securities purchased and other investment liabilities 285,434 14,545 299,979 323,693 16,895 340,588 Debt on real estate investments 1,629,789 83,051 1,712,840 1,837,877 95,927 1,933,804 Accrued expenses and other liabilities 27,269 1,390 28,659 23,973 1,251 25,224 Due to defined benefit plans 428 428 7,055 7,055 Medical benefits payable 6,715 6,715 13,558 13,558 Obligations under securities lending program 684,032 34,857 718,889 585,976 30,584 616,560 Total liabilities 2,626,524 428 140,558 2,767,510 2,771,519 7,055 158,215 2,936,789 Net assets held in trust for defined benefit, defined contribution and post-employment health care coverage: $ 63,116,710 $ 519,202 $ 3,195,942 $ 66,831,854 $ 54,140,413 $ 383,812 $ 2,797,551 $ 57,321,776

See accompanying Notes to Financial Statements.


Financial

Year Ended June 30, 2011 Year Ended June 30, 2010 Post- Post- Defined Defined employment Defined Defined employment Benefit Contribution Health Care Totals Benefit Contribution Health Care Totals

Additions Contributions: Member $ 1,081,958 $ 47,935 $ 1,129,893 $ 1,066,483 $ 46,059 $ 1,112,542 Employer 1,379,104 28,205 $ 103,694 1,511,003 1,374,327 27,359 $ 103,415 1,505,101 Transfers between retirement plans 16,264 (16,264) 16,580 (16,580) Retirement incentive 9,427 9,427 5,017 5,017 Government reimbursements 70,556 70,556 38,156 38,156 Benefit recipient health care premiums 222,130 222,130 222,316 222,316 Other retirement systems 20,219 20,219 18,260 18,260 Total contributions 2,506,972 59,876 396,380 2,963,228 2,480,667 56,838 363,887 2,901,392 Investment income: Net appreciation in fair value of investments 10,730,157 88,372 547,914 11,366,443 5,422,879 39,327 284,400 5,746,606 Interest 471,889 33 24,096 496,018 487,578 38 25,571 513,187 Dividends 691,411 35,306 726,717 643,526 33,749 677,275 Real estate income 191,147 9,760 200,907 228,678 11,993 240,671 Securities lending income 8,276 423 8,699 11,662 612 12,274 Investment income 12,092,880 88,405 617,499 12,798,784 6,794,323 39,365 356,325 7,190,013 Less investment expenses (33,899) (274) (1,731) (35,904) (29,480) (208) (1,546) (31,234) Less external asset management fees (133,146) (6,799) (139,945) (123,327) (6,468) (129,795) Net investment income 11,925,835 88,131 608,969 12,622,935 6,641,516 39,157 348,311 7,028,984 Total additions 14,432,807 148,007 1,005,349 15,586,163 9,122,183 95,995 712,198 9,930,376 Deductions Benefits: Service retirement 4,908,718 4,908,718 4,579,805 4,579,805 Disability benefits 207,245 207,245 205,989 205,989 Survivor benefits 113,531 113,531 103,114 103,114 Health care 604,456 604,456 592,416 592,416 Other 14,913 14,913 11,510 11,510 Total benefit payments 5,244,407 604,456 5,848,863 4,900,418 592,416 5,492,834 Refunds to members who have withdrawn 153,243 12,777 166,020 117,751 9,230 126,981 Administrative expenses 58,860 (160) 2,502 61,202 59,320 (35) 2,523 61,808 Total deductions 5,456,510 12,617 606,958 6,076,085 5,077,489 9,195 594,939 5,681,623 Net increase 8,976,297 135,390 398,391 9,510,078 4,044,694 86,800 117,259 4,248,753 Net assets held in trust for defined benefit, defined contribution and post-employment health care coverage: Beginning of year 54,140,413 383,812 2,797,551 57,321,776 50,095,719 297,012 2,680,292 53,073,023 End of year $ 63,116,710 $ 519,202 $ 3,195,942 $ 66,831,854 $ 54,140,413 $ 383,812 $ 2,797,551 $ 57,321,776

Statements of Changes in Plan Net Assets (in thousands)

See accompanying Notes to Financial Statements.


Notes to Financial StatementsYears ended June 30, 2011 and 2010

1. Summary of Significant Accounting Policies

The financial statements of the State Teachers Retirement System of Ohio (STRS Ohio) presented herein have been prepared on the accrual basis of accounting following the accounting policies set forth below.

Organization — STRS Ohio is a cost-sharing, multiple-employer plan that operates under Chapter 3307 of the Ohio Revised Code (Revised Code) and is administered by a board comprised of 11 members as follows: five elected contributing members; two elected retired teacher members; an investment expert appointed by the governor; an investment expert appointed jointly by the speaker of the House and the Senate president; an investment expert designated by the treasurer of state; and the superintendent of public instruction or his or her designated investment expert.

The accompanying financial statements comply with the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 39, an amendment of GASB Statement No. 14, The Financial Reporting Entity. This statement requires that financial statements of the reporting entity include all of the organizations, activities, functions and component units for which the reporting entity is financially accountable. Financial accountability is defined as the appointment of a voting majority of the component unit’s board and either (1) the reporting entity’s ability to impose its will over the component unit, or (2) the possibility that the component unit will provide a financial benefit to or impose a financial burden on the reporting entity. STRS Ohio does not have financial accountability over any entities.

Investment Accounting — Purchases and sales of investments are recorded as of their trade date. Dividend income is recognized on the ex-dividend date. Interest and rental income are recognized as the income is earned.

STRS Ohio has no individual investment that exceeds 5% of net assets available for benefits.

Contributions and Benefits — Employer and member contributions are recognized when due based on statutory or contractual requirements. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan.

Capital Assets — Capital assets are recorded at historical cost. Depreciation is provided on a straight-line basis over estimated useful lives of five to 10 years for equipment and 40 years for building and building improvements. Capital assets include purchases of $500 or more with a useful life of at least five years. Intangible assets, such as internally developed software, are capitalized in accordance with GASB Statement No. 51 and consistent with the capital asset policy.

Method Used to Value Investments — Investments are reported at fair value. Short-term investments, with maturities less than one year, are reported at amortized cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price at the then current exchange rates. Fixed-income investments are valued based on their coupon rate relative to the coupon rate for similar securities. The fair value of real estate investments is based on independent appraisals and internal valuations. The fair value of alternative investments is determined by the alternative investment partnership based on the valuation methodology outlined in the partnership agreement.

Federal Income Tax Status — Under Section 401(a) of the Internal Revenue Code, STRS Ohio is exempt from federal income taxes.

Use of Estimates — In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, the board makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates and assumptions.

2. Description of the STRS Ohio PlanPlan Membership — STRS Ohio is a statewide retirement plan for licensed teachers and other faculty members employed in the public schools of Ohio (the state) or any school, college, university, institution or other agency controlled,



managed and supported, in whole or part, by the state or any political subdivision thereof.

See charts to the right for member and retiree data and participating employers.

Active members are defined as participants who earned 0.25 years of service credit or more in the valuation year and those employed on or after Jan. 1, with less than 0.25 years of service credit.

Plan Options — New members have a choice of three retirement plan options. In addition to the Defined Benefit (DB) Plan, new members are offered a Defined Contribution (DC) Plan or a Combined Plan. The DC Plan allows members to allocate all their member contributions and employer contributions equal to 10.5% of earned compensation among various investment choices. The Combined Plan offers features of the DC Plan and the DB Plan. In the Combined Plan, member contributions are allocated among investment choices by the member. Employer contributions in the Combined Plan are used to fund a defined benefit payment at a reduced level from the regular DB Plan. Contributions into the DC Plan and the Combined Plan are credited to member accounts as employers submit their payroll information to STRS Ohio, generally on a biweekly basis.

DB Plan Benefits — Plan benefits are established under Chapter 3307 of the Revised Code. Any member may retire who has (1) five years of service credit and attained age 60; (2) 25 years of service credit and attained age 55; or (3) 30 years of service credit regardless of age.

The maximum annual retirement allowance, payable for life, is the greater of the “formula benefit” or the “money-purchase benefit” calculation. Under the “formula benefit,” the retirement allowance is based on years of credited service and final average salary, which is the average of the member’s three highest salary years. The annual allowance is determined by multiplying final average salary by 2.2% for the first 30 years of credited service. Each year over 30 years is incrementally increased by .1%, starting at 2.5% for the 31st year of contributing service up to a maximum allowance of 100% of final average salary. Upon reaching 35 years of Ohio service, the first 31 years of Ohio contributing service are multiplied by 2.5%, and each year over 31 years

is incrementally increased by .1% starting at 2.6% for the 32nd year. Members retiring before age 65 with less than 30 years of service credit receive a percentage reduction in benefit amounts.

Under the “money-purchase benefit” calculation, a member’s lifetime contributions plus interest at specified rates are matched by an equal amount from contributed employer funds. This total is then divided by an actuarially determined annuity factor to compute the maximum annual retirement allowance.

Since the plan is tax-qualified, benefits are subject to limits established by Section 415 of the Internal Revenue Code. Benefits are increased annually by 3% of the original base amount.

Participating Employers at June 30, 2011 and 2010

2011 2010 City school districts 194 194 Local school districts 370 370 County educational service centers 56 57 Exempted village school districts 49 49 Joint vocational schools 49 49 Colleges and universities 36 36 County boards of developmental disabilities 69 69 Community schools 291 273 State of Ohio 1 1 Other 9 9 Total 1,124 1,107

Member and Retiree Data at July 1, 2011 and 2010

2011 2010 Current active members 177,897 180,975 Inactive members eligible for refunds only 134,301 130,588 Terminated members entitled to receive a benefit in the future 16,990 17,377 Retirees and beneficiaries currently receiving a benefit 138,088 133,103 Defined Contribution Plan members 7,963 7,923 Reemployed retirees 23,156 23,651 Total Plan Membership 498,395 493,617


A retiree of STRS Ohio or another Ohio public retirement system is eligible for reemployment as a teacher following the elapse of two months from the date of retirement. Contributions are made by the reemployed member and employer during the reemployment. Upon termination of reemployment or age 65, whichever comes later, the retiree is eligible for an annuity benefit or equivalent lump-sum payment in addition to the original retirement allowance. A reemployed retiree may alternatively receive a refund of member contributions with interest before age 65, once employment is terminated.

DC Plan Benefits — Benefits are established under Chapter 3307.80 to 3307.89 of the Revised Code.

For members who select the DC Plan, all member contributions and employer contributions at a rate of 10.5% are placed in an investment account. The member determines how to allocate the member and employer money among various investment choices. The member receives a quarterly statement of his or her account activity and balance. The remaining 3.5% of the 14.0% employer rate is allocated to the defined benefit unfunded liability.

A member is eligible to receive a retirement benefit at age 50 and termination of employment. The member may elect to receive a lifetime monthly annuity or a lump-sum withdrawal. Employer contributions into member accounts are vested after the first anniversary of the first day of paid service.

Members in the DC Plan who become disabled are entitled only to their account balance. If a member dies before retirement benefits begin, the member’s designated beneficiary is entitled to receive the member’s account balance.

Combined Plan — In the Combined Plan, member contributions are allocated among investment choices by the member, and employer contributions are used to fund a defined benefit payment.

A member’s defined benefit is determined by multiplying 1% of the member’s final average salary by the member’s years of service credit. The defined benefit portion of the Combined Plan payment is payable to a member on or after age 60. The DC portion of the account may be taken as a lump sum or converted to a lifetime monthly annuity.

Both DC and Combined Plan members transfer to the Defined Benefit Plan during their fifth year of

membership unless they permanently select the DC or Combined Plan. During fiscal 2011, $16,264,000 was transferred from the DC and Combined Plan accounts to the Defined Benefit Plan. During fiscal 2010, $16,580,000 was transferred from the DC and Combined Plan accounts to the Defined Benefit Plan.

Death, Survivor and Disability Benefits — A Defined Benefit Plan or Combined Plan member with five or more years of credited service who becomes disabled (illness or injury preventing individual’s ability to perform regular job duties for at least 12 months) is entitled to a disability benefit. Additionally, eligible survivors of members who die before service retirement may qualify for monthly benefits.

A death benefit of $1,000 is payable to the bene-ficiary of each deceased retired member who participated in the Defined Benefit Plan. Death benefit coverage up to $2,000 can be purchased by participants in the DB, DC or Combined Plans. Various other benefits are available to members’ beneficiaries.

Health Care Coverage After Retirement — Ohio law authorizes the State Teachers Retirement Board to offer a cost-sharing, multiple-employer health care plan. STRS Ohio provides access to health care coverage to eligible retirees who participated in the Defined Benefit or Combined Plans and their eligible family members.

Coverage under the current program includes hospitalization, physicians’ fees, prescription drugs and reimbursement of monthly Medicare Part B premiums. Pursuant to the Ohio Revised Code, the Retirement Board has discretionary authority over how much, if any, of the associated health care costs will be absorbed by the plan. All benefit recipients, for the year ended June 30, 2011, pay a portion of the heath care costs in the form of a monthly premium. Benefit recipients contributed $222.1 million or 37% of the total health care costs (excluding deductibles, coinsurance and copayments). For the year ended June 30, 2010, benefit recipients also contributed 37% of the total health care costs.

Under Ohio law, funds to pay health care costs may be deducted from employer contributions, currently 14% of compensation. Of the 14% employer contribution rate, 1% of covered payroll was allocated to post-employment health care. For the



years ended June 30, 2011 and 2010, employer contributions allocated to health care totaled $103.7 million and $103.4 million, respectively.

Medicare Part D is a federal program to help cover the costs of prescription drugs for Medicare beneficiaries. This program allows STRS Ohio to recover part of the cost for providing prescription coverage since all eligible STRS Ohio health care plans include creditable prescription drug coverage. For the years ended June 30, 2011 and 2010, STRS Ohio received $40.9 million and $38.2 million in Medicare Part D reimbursements, respectively.

STRS Ohio began participating in the Early Retiree Reinsurance Program (ERRP) in 2011. ERRP is managed by Health and Human Services and provides financial assistance to employers that maintain health care coverage for early retirees not yet eligible for Medicare. In the first year that assistance was available, STRS Ohio received $29.7 million in this program.

Pension and post-employment health care assets are commingled for investment purposes. Consequently, amounts reported for individual asset classes are allocated between pension and post-employment health care based upon ending net assets.

Pension Plan and Health Care Plan Funding Progress — The actuarial assumptions and methods used in the pension plan and health care valuations were selected in compliance with the parameters established under GASB Statements No. 25 and No. 43. As noted previously, health care plan net assets are commingled with pension plan net assets for investment purposes.

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality and health care cost trends. Actuarially determined amounts are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future.

The schedule of employer contributions shown below presents information about the amounts contributed to the plan by employers in comparison to the annual required contribution (ARC), an amount that is actuarially determined in accordance with parameters of GASB Statements No. 25 and No. 43. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost for each year and amortize any unfunded actuarial liabilities over a period not to exceed 30 years. The most recent pension valuation reflects an amortization period of infinity, but is reduced to 30 years for disclosure compliance.

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan understood by the employer and plan participants), and include the types of benefits provided at the time of the valuation. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

Required Pension and Health Care Employer Contributions (dollar amounts in thousands)

Pension Health Care Annual Annual Year Ended Required Percent Required Percent June 30 Contribution Contributed Contribution Contributed 2009 $1,502,240 89% $775,262 13% 2010 $2,623,624 52% $635,447 16% 2011 $2,715,523 51% $448,890 23%

Key Methods and Assumptions Used in Actuarial Valuation

Actuarial Information Pension Health Care

Valuation date July 1, 2011 Jan. 1, 2011

Actuarial cost method Entry age Entry age

Amortization method Level percentage, open

Level percentage, open

Amortization period 30 years 30 years

Asset valuation method Four-year, smoothed market with 91%/109% corridor

Fair market value

Actuarial assumptions:

Investment rate of return 8.0% 5.4%

Projected salary increases 12.00% at age 20, to 3.25% at age 65

varies by age from 3.0%–12.0%

Payroll increase 3.50% for next 7 years; 4.00% thereafter

3.50% for next 8 years; 4.00% thereafter

Inflation assumption 3.0% 3.0%

Cost-of-living adjustment 3.0% simple N/A

Trend rate N/A 7.8%–11.0% initial; 5% ultimate



The funded status and funding progress of the pension plan and health care plan require an actuarial valuation. The funded status and funding progress of the pension plan as of June 30, 2011, and the preceeding two years is as follows:

The funded status and funding progress of the health care plan as of Jan. 1, 2011, and the preceeding two years is as follows:

The schedules of funding progress present multi-year trend information about whether the actuarial values of plan assets are increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Schedules of funding progress for the pension and health care plans are presented on Pages 31 and 32.

Refunds — Withdrawal cancels a member’s rights and benefits in STRS Ohio.

Upon termination of employment, a Defined Benefit Plan member may withdraw accumulated contributions made to STRS Ohio. Refunds of member contributions may include interest and 50% matching payments.

A Combined Plan member is eligible for the present value of future benefits from the defined benefit portion of the account if he or she terminates employment after at least five years of service. For the defined contribution portion of the account, the refund consists of member contributions plus any investment gains or losses on those contributions.

Defined Contribution Plan members receive their contributions plus any investment gains or losses until they have completed one year of membership. After one year of membership, members receive the balance in their accounts, including employer contributions and related gains or losses.

Alternative Retirement Plan — Eligible faculty of Ohio’s public colleges and universities may choose to enroll in either STRS Ohio or an alternative retirement plan (ARP) offered by their employer.

Employees have 120 days from their date of hire to select a retirement plan.

For employees who elect an ARP, employers are required to remit employer contributions to STRS Ohio at a rate of 3.5% of payroll. For the year ended June 30, 2011, the ARP participant payroll totaled $477,923,000. For the year ended June 30, 2010, the ARP participant payroll totaled $459,582,000.

Administrative Expenses — The costs of administering the Defined Benefit and post-employment health care plans are financed by investment income. The administrative costs of the Defined Contribution Plan are financed by participant fees.

3. Contribution Requirements and ReservesEmployer and member contribution rates are established by the Retirement Board and limited by Chapter 3307 of the Revised Code. The member rate is limited to 10% and the employer rate is limited to 14% of covered payroll.

Various funds are established under the Revised Code to account for contributions, reserves, income and administrative expenses.

The Teachers’ Savings Fund (TSF) is used to accumulate member contributions in trust.

The Employers’ Trust Fund (ETF) is used to accumulate employer contributions in trust. The ETF includes assets allocated to post-employment health care from which payments for health care coverage are made. Investment fair value changes for the Defined Benefit Plan and the health care program from year-to-year are recorded in the ETF.

The Annuity and Pension Reserve Fund (APRF) is the fund from which all annuities and pension payments to retired members are made. Reserves are transferred to this fund from the TSF and ETF funds at the time of retirement.

Schedule of Health Care Plan Funding Progress (dollar amounts in thousands)

Unfunded Actuarial UAAL as Actuarial Actuarial Actuarial Accrued % of Valuation Value Accrued Liability Funded Covered Covered Date of Assets Liability (UAAL) Ratio Payroll Payroll Jan. 1, 2009 $2,693,699 $13,413,723 $10,720,024 20.1% $10,053,041 106.6% Jan. 1, 2010 $2,967,540 $11,355,003 $8,387,463 26.1% $10,347,383 81.1% Jan. 1, 2011 $3,108,541 $8,631,313 $5,522,722 36.0% $10,520,932 52.5%

Schedule of Pension Plan Funding Progress (dollar amounts in thousands)

Unfunded Actuarial UAAL as Actuarial Actuarial Actuarial Accrued % of Valuation Value Accrued Liability Funded Covered Covered Year of Assets Liability (UAAL) Ratio Payroll Payroll 2009 $54,902,859 $91,440,955 $36,538,096 60.0% $10,800,817 338% 2010 $55,946,259 $94,720,669 $38,774,410 59.1% $11,057,260 351% 2011 $58,110,495 $98,766,204 $40,655,709 58.8% $11,097,598 366%



The Survivors’ Benefit Fund is the fund from which all survivor benefit payments are made for which reserves have been transferred from the TSF and the ETF.

The Defined Contribution Fund accumulates DC member and employer contributions, Combined Plan member contributions, investment earnings and DC plan expenses.

The Guarantee Fund is used to accumulate income derived from gifts, bequests and investments for the year.

The Expense Fund is the fund from which all expenses for the administration and management of STRS Ohio are paid each year.

After interest is allocated to the various funds, the Guarantee Fund and the Expense Fund are closed into the ETF at year-end.

At June 30, 2011 and 2010, plan net assets were included in the various funds as shown in the chart below.

4. Commitments and ContingenciesSTRS Ohio has made commitments to fund various real estate investments totaling $581,003,575 as of June 30, 2011. The commitments as of June 30, 2011, have expected funding dates from August 2011 to April 2014.

STRS Ohio has made commitments to fund various alternative investments totaling $3,119,572,000 as of June 30, 2011. The expected funding dates for the commitments as of June 30, 2011, range from July 2011 to June 2017.

STRS Ohio is a party in various lawsuits. While the final outcome cannot be determined at this time, management is of the opinion that the liability, if any, for these legal actions will not have a material adverse effect on the net assets available for benefits.

Investments Held at Fair Value by STRS Ohio at June 30, 2011 and 2010 (summarized and in thousands)

Category June 30, 2011 June 30, 2010 Short-term: Commercial paper $ 4,334,154 $ 3,078,470 Short-term investment funds 33,000 49,000 Repurchase agreements – – Total short-term 4,367,154 3,127,470 Fixed income: U.S. government agency obligations 927,317 958,878 Corporate bonds 4,626,038 4,207,714 High yield and emerging market 1,252,280 1,110,016 Mortgages and asset-backed 4,064,050 4,070,661 U.S. government obligations 2,348,712 3,711,243 Total fixed income 13,218,397 14,058,512 Domestic common and preferred stock 24,406,336 19,530,128 International: (See Note 6) 12,955,372 11,290,445 Real estate: (See Note 7) East region 2,361,152 2,201,662 Midwest region 1,093,349 970,248 South region 567,740 591,811 West region 1,429,065 1,274,687 REITs 819,738 719,420 Other 853,631 876,266 Total real estate 7,124,675 6,634,094 Alternative investments: (See Note 8) 5,920,652 4,133,488 Invested securities lending collateral 718,885 616,686 Total investments and invested securities lending collateral $ 68,711,471 $ 59,390,823

5. Deposit and Investment Risk DisclosureInvestment Authority — The investment authority of the Retirement Board is governed by Section 3307.15 of the Revised Code that also requires the Retirement Board to publish its investment policies annually and make copies available to interested parties. This section requires that investments be made with care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.

Investments held at fair value by STRS Ohio at June 30, 2011 and 2010, are summarized in the chart below.


Fund Balances (in thousands)

June 30, 2011 June 30, 2010 Teachers’ Savings Fund $ 10,907,611 $ 10,641,167 Employers’ Trust Fund (7,036,560) (11,457,857) Annuity and Pension Reserve Fund 61,364,070 56,713,007 Survivors’ Benefit Fund 1,077,531 1,041,647 Defined Contribution Fund 519,202 383,812 Total $ 66,831,854 $ 57,321,776

Cash and Short-Term Investments — Cash and short-term investments are combined for reporting purposes and include bank cash balances of $5,337,000 at June 30, 2011.


Custodial Credit Risk — Deposits are exposed to custodial credit risk if they are uninsured and uncollateralized. Custodial credit risk is the risk that, in the event of a failure of the counterparty, STRS Ohio will not be able to recover the value of its investment or collateral securities that are in the possession of an outside party. Investment securities are exposed to custodial credit risk if the securities are uninsured, are not registered in the name of STRS Ohio, and are held by either the counterparty or the counterparty’s trust department or agent but not in the name of STRS Ohio.

All investments are held in the name of STRS Ohio or its nominee by the Treasurer of the State of Ohio as custodian. At June 30, 2011 and 2010, the bank cash balances were approximately $15,388,000 and $12,231,000, respectively. Bank balances are insured up to $250,000 by the Federal Deposit Insurance Corporation. The remaining bank deposits are covered by collateral held in the name of STRS Ohio’s pledging financial institution, as required by state statute.

Interest Rate Risk — Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of the investment. Duration is a measure of a debt investment’s exposure to fair value changes arising from changing interest rates. It uses the present value of cash flows, weighted for those cash flows as a percentage of the investment’s full price. The longer the maturity, the more the value of the fixed-income investment will fluctuate with interest rate changes. The table on Page 26 shows the maturities by weighted-average duration at June 30, 2011 and 2010.

Concentration of Credit Risk — STRS Ohio is guided by statute and policy in the selection of security investments. No investment in any one organization represents 5% or more of plan net assets.

GASB Statement No. 40 — GASB Statement No. 40, Deposit and Investment Risk Disclosures, addresses common deposit and investment risks related to credit risk, concentration of credit risk, interest rate risk and foreign currency risk.

Credit Risk — The quality ratings of investments in fixed-income securities as described by Standard & Poor’s or Moody’s at June 30, 2011 and 2010, are shown in the chart below. U.S. government fixed-income securities or obligations explicitly guaranteed by the U.S. government are not considered to have credit risk.

Quality Ratings of Fixed-Income Investments Held at June 30, 2011 and 2010 (in thousands)

Quality June 30, 2011 June 30, 2010 Investment Type Rating Fair Value Fair Value

U.S. government agency obligations AAA $ 764,804 $ 648,074 AA 146,014 – A 16,499 15,820 NR – 294,984 Total U.S. government agency obligations 927,317 958,878 Corporate bonds AAA 1,607,948 1,462,542 AA 436,964 221,445 A 1,561,501 1,414,434 BBB 886,053 982,179 BB 35,443 77,649 NR 98,129 49,465 Total corporate bonds 4,626,038 4,207,714 High yield and emerging markets fixed income AAA 264 13,461 AA 1,644 4,338 A 25,210 15,991 BBB 143,819 149,322 BB 264,566 262,164 B 489,198 424,505 CCC and below 171,501 129,762 NR 156,078 110,473 Total high yield and emerging markets fixed income 1,252,280 1,110,016 Mortgages and asset-backed AAA 3,965,660 3,925,971 BBB – 13,600 BB 19,148 54,480 B 12,287 16,806 NR 66,955 59,804 Total mortgages and asset-backed 4,064,050 4,070,661 Credit risk debt securities 10,869,685 10,347,269 U.S. government obligations 2,348,712 3,711,243 Total fixed-income investments $ 13,218,397 $ 14,058,512



Significant investment guidelines that relate to investment concentration, interest rate risk and foreign currency risk by major asset class are as follows:

Overall Investment Portfolio — The Retirement Board has approved a target risk budget range of 0.60% to 1.20%, with a working range of 0.20% to 1.60%, annualized for active investment management for the total fund. A risk budget is the amount the Retirement Board has approved for returns to vary from an unmanaged passive investment profile. The board expects active management to add net 0.40% of annualized excess return over moving five-year periods.

Fixed Income — The portfolio will seek diversification by market sector, quality and issuer. The risk budget range for fixed income is 0.10% to 1.50% using the Barclays Capital U.S. Universal Index as the benchmark. Derivatives may be used to adjust the exposure to interest rates, individual securities or to various market sectors in the portfolio. Underlying exposure of derivatives for fixed-income investments will not exceed 5% of total fund assets.

Domestic Equities — The risk budget range for domestic equities is 0.20% to 1.50% using the Russell 3000 as the benchmark. Derivatives may be used in management of the equity portfolio. The use of leverage is prohibited. Underlying exposure of equity derivatives cannot exceed 10% of total fund assets.

International — International assets will be a diversified portfolio including both developed and emerging countries. The risk budget range for international equity is between 1.00% to 2.50% using a blended benchmark of 80% MSCI World ex USA Index (50% hedged) and 20%

Duration of Fixed-Income Investments Held at June 30, 2011 and 2010 (in thousands)

June 30, 2011 June 30, 2010 Fair Weighted-Average Fair Weighted-Average Investment Type Value Duration Value Duration

U.S. government agency obligations $ 927,317 1.068 $ 958,878 2.180 Corporate bonds 4,626,038 3.250 4,207,714 5.002 High yield and emerging markets fixed income 1,252,280 5.759 1,110,016 4.747 Mortgages and asset-backed 4,064,050 4.253 4,070,661 2.831 U.S. government obligations 2,348,712 6.551 3,711,243 4.756 Total fixed income $ 13,218,397 $ 14,058,512

MSCI Emerging Market Free Index. Derivatives may be used in management of the portfolio and underlying exposure of derivatives for international investments will not exceed 10% of total fund assets.

Real Estate — The real estate portfolio shall be diversified between property type, geographic location and investment structure. The risk budget range for real estate investments is 2.00% to 7.00% using a benchmark of 85% NCREIF Property Index and 15% Wilshire Real Estate Investment Trust Index. Investments in non-core real estate, which includes domestic and international opportunity funds and real estate development projects, shall not exceed 20% of total real estate assets. Derivatives may be used and cannot exceed 1% of total fund assets. STRS Ohio may borrow funds on a secured or unsecured basis and leverage is limited to 50% of internally managed real estate assets excluding publicly traded real estate investment trusts (REITs).

Foreign Currency Risk — Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or deposit. Forward currency contracts may be used to manage the exposure to foreign currencies. The system’s foreign currencies and investments at June 30, 2011 and 2010 are shown in the chart on Page 27. The investments figures are comprised of numerous portfolios within international equity, debt securities and real estate investments.

Securities Lending — STRS Ohio participates in a domestic and international securities lending program whereby securities are loaned to investment brokers/dealers (borrower). Securities loaned are collateralized by the borrower at 102% of the domestic equity and U.S. dollar-



Foreign Currency Held at June 30, 2011 and 2010 (in thousands)

June 30, 2011 June 30, 2010 High Yield & High Yield & Foreign Currency Emerging Markets Emerging Markets Denomination International Fixed Income International Fixed Income

Argentina Peso $ 559 3,182 $ 422 Australian Dollar 235,794 85,371 Brazilian Real 187,855 6,479 180,770 $ 11,366British Pound Sterling 520,669 1,528 615,135 Canadian Dollar 14,883 228,569 Chilean Peso 34,374 27,835 Colombian Peso 472 4,169 2,376 3,505Czech Koruna 27,565 19,661 Danish Krone 70,377 81,238 Egyptian Pound 13,873 67 22,759 74Euro Currency 894,865 8,874 435,340 4,908 Ghana Cedi 2,484 343Hong Kong Dollar 443,538 435,695 Hungarian Forint 16,542 15,361 Indian Rupee 123,482 646 118,328 Indonesian Rupiah 40,353 4,665 45,920 4,370Israeli Shekel 36,157 21,936 Japanese Yen 427,140 126 369,229 4,540Jordan Dollar 1 Malaysian Ringgit 44,890 4,847 46,463 4,017Mexican Nuevo Peso 55,593 5,958 41,146 4,269 New Zealand Dollar 110,710 66,007 Nigerian Naira 264Norwegian Krone 213,575 128,953 Philippines Peso 20,386 668 14,527 Polish Zloty 41,894 24,156 Renminbi Yuan 2,234 3,040Russian New Ruble 10,950 15,227 989Singapore Dollar 102,062 138,706 South African Rand 219,561 5,998 172,464 1,010South Korean Won 363,069 280,878 Sri Lanka Rupee 1,015 Swedish Krona 166,906 62,313 Swiss Franc 272,990 89,446 Taiwan Dollar 333,894 263,775 Thai Baht 77,398 63,356 Turkish Lira 69,135 69,301 Zimbabwian Dollar 885 Held In Foreign Currency 5,193,745 49,955 4,187,604 39,391 Held In U.S. Dollars 7,761,627 1,202,325 7,102,841 1,070,625 Total $ 12,955,372 $ 1,252,280 $ 11,290,445 $ 1,110,016

A custodial agent bank administers the program and STRS Ohio receives a fee from the borrower for the use of loaned securities. Cash collateral from securities lending is invested in repurchase agreements, commercial paper and U.S. corporate obligations.

The credit quality of the invested cash collateral is the same as the credit quality on STRS Ohio direct holdings. There are slight mismatches between the duration of the cash invested and the length of time the securities are on loan. As of June 30, 2011, the average maturity of the invested cash collateral is 30 days. Because much of the cash collateral is invested in floating rate securities, interest rates are reset every three days on average as of June 30, 2011. STRS Ohio has minimized its exposure to credit risk due to borrower default by having the custodial agent bank determine daily that the required collateral meets the specified collateral requirements. There are no restrictions on the amount of securities that can be loaned. The fair value of the loaned securities was approximately $679,611,000 and $592,686,000 as of June 30, 2011 and 2010, respectively. The fair value of the associated invested cash collateral as of June 30, 2011 and 2010, was approximately $718,885,000 and $616,686,000, respectively.

6. International InvestmentsExternally Managed — STRS Ohio has investments in international equity securities through the use of external money managers. It is the intent of STRS Ohio and the money managers to be fully invested; however, cash and short-term fixed-income investments may be held temporarily. The portfolios are managed in accordance with various mandates based on Morgan Stanley Capital International’s (MSCI) indexes. Investments are held in both developed and emerging international markets.

denominated fixed-income loaned securities’ fair value and 105% of the international loaned securities’ fair value.

STRS Ohio lends domestic equities, international, U.S. Treasuries, agencies and corporate bonds. The collateral received is cash, U.S. Treasuries or related agency securities. STRS Ohio cannot sell or pledge collateral received. If a borrower defaults, then the collateral can be liquidated.



Internally Managed:

Developed Markets, Emerging Stock and Country Funds — STRS Ohio actively invests in developed and emerging markets through individual stock selection, including international publicly traded real estate securities, and traded country funds. Each country fund consists of individual equity securities pooled together in an attempt to match or exceed the local country’s index.

Europe, Australia and Far East (EAFE) Index Fund — To increase diversification in international developed markets, STRS Ohio invests in an EAFE Index Fund. The EAFE Index Fund purchases foreign equities, futures and other traded investments to replicate the makeup of the EAFE benchmark.

Equity Swaps — Four EAFE and three Emerging Market Free (EMF) international equity swap agreements were contracted during fiscal 2011 with maturity dates in fiscal 2012. In exchange for LIBOR (London Interbank Offered Rate) minus a negotiated spread, STRS Ohio will receive or pay the difference of the change in the total return of the various market indices included in the swap agreements. Fixed-income securities with a notional amount of $1.40 billion have been set aside at the State Street Bank and Trust Company as security.

Forward Contracts — Managers have the ability to add value through currency management. Forward currency contracts are used to minimize the impact of foreign currency fluctuations on the asset positions of foreign investments.

The fair values of international investments held at June 30, 2011 and 2010, are shown in the chart below.

7. Real Estate InvestmentsDirect — STRS Ohio properties are diversified between property type, geographic location and investment structure. Direct real estate assets include both single and multi-tenant retail, office and warehouse properties, as well as apartments.

Public Real Estate — Public real estate includes publicly traded real estate securities and real estate investment trusts (REITs). REITs are real estate company stocks with a high dividend-income component. REITs divide the ownership of the real estate company and its properties among all the shareholders. REITs are required to distribute 90% of the company’s taxable income to their shareholders annually in the form of dividends. Distributions are taxable to shareholders rather than the real estate company. STRS Ohio is exempt from federal and state income taxes.

Other — Other real estate investments include commingled funds that are externally managed. Commingled funds generate income as a result of operations and property sales, which are distributed to the investors.

Debt on Real Estate Investments and Interest Rate Swaps — STRS Ohio uses debt to lower the cash outlay in acquiring real estate assets and to positively impact the performance of the real estate portfolio. Of the debt on real estate investments, $300 million was recourse debt as of June 30, 2011 and 2010. This debt is recourse to STRS Ohio with a covenant not to mortgage a specific pool of real estate assets. The remainder of the debt on real estate investments at June 30, 2011 and 2010, is non-recourse debt, which means that in the event of default, the specific real estate holding is used as collateral for the loan and general assets of STRS Ohio are not pledged as collateral.

At June 30, 2011, and June 30, 2010, the recourse loan of $300 million had a maturity date of May 2012. Interest on the recourse loan is based on LIBOR plus a spread.

Of the non-recourse debt at June 30, 2011, loan maturities ranged from March 2012 to

Fair Values of International Investments Held at June 30, 2011 and 2010 (in thousands)

June 30, 2011 June 30, 2010 Externally managed International stocks $ 5,753,225 $ 5,033,018 International other assets 55,995 International currency and liquidity reserves 107,247 220,155 Forward contracts 2,913 (49,374) Total externally managed 5,863,385 5,259,794 Internally managed Developed markets 3,853,060 3,326,185 Emerging stock and country funds 1,768,118 1,404,576 International publicly traded real estate securities 37,084 63,249 EAFE Index Fund 1,335,081 1,248,076 EAFE equity swaps 37,089 (7,217) EMF equity swaps 68,835 Forward contracts (7,280) (4,218) Total internally managed 7,091,987 6,030,651 Total international $ 12,955,372 $ 11,290,445



Forward Contracts — Forward contracts in various currencies were used to transact and hedge direct foreign equity and real estate investments that STRS Ohio maintains through the use of outside managers. Additionally, forward contracts were used to hedge currency exposure as a result of the EAFE equity swap agreements. STRS Ohio is obligated to deliver the foreign currency at a certain dollar price sometime in the future. To fulfill this obligation at maturity, STRS Ohio must obtain the currency in the open market. Before the contract matures, STRS Ohio can enter into an offsetting forward contract that nets out the original contract. These events expose STRS Ohio to currency market risk, which can fluctuate. The unrealized gain or loss on forward-currency contracts is included as net appreciation/depreciation in the Statements of Changes in Plan Net Assets. STRS Ohio is also subject to the risk that the counterparty will fail to fulfill the contract.

Futures — STRS Ohio had investments in S&P 500 Index futures during the year. Index futures are designed to offer lower cost and more efficient alternatives to buying individual stocks that comprise the index. The market and credit risk of the futures were the same as if STRS Ohio had owned the underlying stocks that comprise the index. The realized gain or loss on index futures is included as net appreciation/depreciation in the Statements of Changes in Plan Net Assets.

Additionally, futures were used in the EAFE Index Fund and by external money managers. The system’s exposure to future and forward contracts at June 30, 2011 and 2010, is shown in the chart below.

Options — STRS Ohio writes option contracts on existing stock positions to enhance the return on the stock portfolio. In exchange for a premium, STRS Ohio gives the option buyer the right to buy or sell the underlying stock. Options are also purchased to “cover” existing written open option positions. The notional

July 2034. Non-recourse debt at June 30, 2010, had loan maturities ranging from December 2010 to July 2034. The repayment schedule for real estate debt is reflected in the table below.

8. Alternative InvestmentsAlternative investments are primarily investments in private equities and opportunistic/diversified investments. Private equity is actively managed and includes venture and buyout/growth opportunities. STRS Ohio invests as a limited partner in closed-end partnerships along with other pension funds, endowments and high-net-worth individuals. Private equity investments tend to be limited to a particular industry to take advantage of the general partner’s knowledge and skill. Opportunistic/diversified investments are actively managed and are tactical in nature with a goal of downside protection during equity bear markets.

9. DerivativesEquity Swap Agreements — As discussed in Note 6, STRS Ohio has entered into international equity swap agreements. No funds are required as collateral by either party; however, STRS Ohio has purchased fixed-income securities equivalent to the initial exposure, which are located in a subcustodial account at the State Street Bank and Trust Company as of June 30, 2011. The notional amount of the contracts was $1.40 billion. The unrealized gain at June 30, 2011, was $35.1 million and is included as net appreciation/depreciation in the Statements of Changes in Plan Net Assets. The market risk of the swap is the same as if STRS Ohio owned the underlying stocks that comprise the indexes. The revenues and expenses resulting from these agreements have been recorded in the basic financial statements.

Exposure to Future and Forward Contracts Held at June 30, 2011 and 2010 (in thousands)

June 30, 2011 June 30, 2010 Forward contracts Externally managed $ 4,668,174 $ 3,567,503 Internally managed 4,740,361 2,999,766 Total forward contracts $ 9,408,535 $ 6,567,269 Future contracts S&P 500 $ 6,714 $ 2,269,402 EAFE Index Fund 20,709 27,805 Externally managed 15,030 14,186 Total future contracts $ 42,453 $ 2,311,393

Real Estate Debt Repayment Schedule As of June 30, 2011 (in thousands)

By Fiscal Year Principal Interest 2012 $ 436,699 $ 47,451 2013 181,977 34,531 2014 148,632 26,470 2015 1,349 22,843 2016 60,633 21,718 2017–2021 350,000 14,209 2022–2026 49,000 2,415 2027–2031 143,000 1,907 2032–2036 341,550 794 Total $ 1,712,840 $ 172,338



value of the options contracts at June 30, 2011, was $4.2 million. The fair value of the options contracts of $12,000 is included in the Statements of Plan Net Assets.

Fixed-Income Credit Default Swaps — The system may manage credit exposure through the use of credit default swaps. A credit default swap is a contract whereby the credit risk associated with an investment is transferred by entering into an agreement with another party who, in exchange for periodic fees, agrees to make payments in the event of a default or other predetermined credit event. One of the main advantages of a credit default swap is it allows for exposure to credit risk while limiting exposure to other risks, such as interest rate and currency risk. STRS Ohio held credit default swaps with notional values of $6,350,000 and $6,003,000 as of June 30, 2011 and 2010, respectively.

Fixed-Income Credit Linked Notes — Credit linked notes are structured securities whose principal and interest payments are based on a reference to underlying bonds. One of the general reasons for owning credit linked notes is to gain exposure to an underlying security where, otherwise, direct ownership is limited by restrictions imposed by certain countries. STRS Ohio held credit linked notes with a value of $14,582,000 at June 30, 2011, which is included in the Statements of Plan Net Assets. STRS Ohio held credit linked notes with a value of $8,376,000 at June 30, 2010.

Fixed-Income Interest Rate Swaps — Interest rate swaps are derivative instruments in which one party exchanges a stream of fixed interest rate cash flows for floating interest rate cash flows. A notional amount of principal is required to compute the actual cash amounts and is determined at the inception of the contract. At June 30, 2011 and 2010, STRS Ohio did not hold any interest rate swaps.

10. Pension PlanSubstantially all STRS Ohio employees are required to participate in a contributory retirement plan administered by the Ohio Public Employees Retirement System of Ohio (OPERS). OPERS is a cost-sharing, multiple-employer public employee retirement system.

Eligible employees are entitled to a retirement benefit, payable monthly for life, equal to 2.2% of their final average salary for each year of credited service up to 30 years and 2.5% for each year of

service over 30 years. Final average salary is the employee’s average salary over the highest three years of earnings. Benefits fully vest on reaching five years of service. Vested employees may retire at any age with 30 years of credited service; at age 55 with a minimum of 25 years of credited service; and at age 60 with a minimum of five years of service. Employees retiring with less than 30 years of service and under age 65 receive reduced retirement benefits. Benefits are established by state law.

The member and employer contribution rates are 10.0% and 14.0% of covered payroll, respectively. The required employer contributions for the current year and the two preceding years are shown in the chart below.

Historical trend information showing the progress of OPERS in accumulating sufficient assets to pay benefits when due is presented in the OPERS Comprehensive Annual Financial Report. OPERS issues a publicly available financial report for the plans. The report may be obtained by writing to OPERS, 277 E. Town St., Columbus, OH 43215-4642.

OPERS also provides post-employment health care coverage to age and service retirees with 10 or more years of qualifying Ohio service credit and to primary survivor recipients of such retirees. Health care coverage for disability recipients is available. The health care coverage provided by the retirement system is considered an Other Post-Employment Benefit (OPEB) as described in GASB Statement No. 43. A portion of each employer’s contribution to OPERS is set aside for funding post-employment health care. The Revised Code provides statutory authority for employer contributions. The employer rate set aside for post-employment health care was 5.5% from July 1, 2009, to Feb. 28, 2010, and 5.0% from March 1, 2010, to Dec. 31, 2010.

STRS Ohio Required Employer Contributions to OPERS

Year Annual Ended Required Percentage June 30 Contributions Contributed 2009 $7,004,000 100% 2010 $6,648,000 100% 2011 $7,338,000 100%



Financial

Notes to Pension Plan Trend Data

Valuation date July 1, 2011 July 1, 2010Actuarial cost method Entry age Entry ageAmortization method Level percentage, open Level percentage, openRemaining amortization period (for GASB disclosure) 30.0 years 30.0 yearsAsset valuation method Four-year, smoothed with 91%/109% corridor Four-year, smoothed with 91%/109% corridor Actuarial assumptions: Investment rate of return 8.00% 8.00% Projected salary increases 12.00% at age 20 to 3.25% at age 65 12.00% at age 20 to 3.25% at age 65 Payroll increase 3.50% for next 7 years, 4.00% thereafter 3.50% for next 8 years, 4.00% thereafter Inflation assumption 3.00% 3.00% Cost-of-living adjustments 3% simple 3% simple

Required Schedule of Pension Plan Funding Progress For the Years Ended June 30, 2006–2011 (dollar amounts in thousands)

Unfunded Actuarial Actuarial UAAL as Accrued Accrued Ratio of % of Valuation Liability Valuation Liability Assets Covered Covered Year (AAL)* Assets* (UAAL)* to AAL Payroll** Payroll 2006 $77,371,024 $58,008,050 $19,362,974 75.0% $9,974,061 194% 2007 $81,126,642 $66,671,511 $14,455,131 82.2% $10,199,505 142% 2008 $87,432,348 $69,198,008 $18,234,340 79.1% $10,460,473 174% 2009 $91,440,955 $54,902,859 $36,538,096 60.0% $10,800,817 338% 2010 $94,720,669 $55,946,259 $38,774,410 59.1% $11,057,260 351% 2011 $98,766,204 $58,110,495 $40,655,709 58.8% $11,097,598 366%

Year Annual Ended Required Percentage June 30 Contributions* Contributed 2006 $1,417,598 88% 2007 $1,539,805 83% 2008** $1,329,498 100% 2009 $1,502,240 89% 2010 $2,623,624 52% 2011 $2,715,523 51%

*The amounts reported in this schedule do not include contributions for post-employment health care coverage. The Governmental Accounting Standards Board (GASB) requires disclosure of the Annual Required Contributions (ARC) using a maximum amortization period of 40 years; reduced to 30 years effective July 1, 2007. Amounts shown as the ARC for each year may be different from the contributions required by state statute. The information here was determined as part of the actuarial valuations for the dates indicated. Additional information as of the latest actuarial valuation is shown in the table below.

**Revised economic and non-economic assumptions due to experience review.

Required Schedule of Employer Contributions Related to Pension Plan For the Years Ended June 30, 2006–2011 (dollar amounts in thousands)

The information presented in the required supplemental schedules was determined as part of the actuarial valuations for the dates indicated. See accompanying independent auditors’ report.

*The amounts reported in this schedule do not include assets or liabilities for post-employment health care coverage.

**Covered payroll includes salaries for alternative retirement plan participants and defined contribution plan participants. For 2011 and 2010, alternative retirement plan participant payroll totaled $477,923 and $459,582, respectively. For 2011 and 2010, defined contribution plan payroll totaled $250,307 and $256,166, respectively.


Financial

Required Schedule of Health Care Funding Progress, 2007– 2011 (dollar amounts in thousands)

Unfunded Actuarial UAAL as Actuarial Actuarial Actuarial Accrued % of Valuation Value Accrued Funded Funded Covered Covered Date of Assets Liability (UAAL) Ratio Payroll Payroll Jan. 1, 2007 $3,821,687 $13,599,374 $9,777,687 28.1% $9,665,780 101.2% Jan. 1, 2008 $4,037,843 $12,170,949 $8,133,106 33.2% $9,834,501 82.7% Jan. 1, 2009 $2,693,699 $13,413,723 $10,720,024 20.1% $10,053,041 106.6% Jan. 1, 2010 $2,967,540 $11,355,003 $8,387,463 26.1% $10,347,383 81.1% Jan. 1, 2011 $3,108,541 $8,631,313 $5,522,722 36.0% $10,520,932 52.5%

Year Annual Ended Required Percentage June 30 Contributions Contributed 2007 $630,138 15.3% 2008 $582,217 16.9% 2009 $775,262 13.1% 2010 $635,447 16.3% 2011 $448,890 23.1%

Required Schedule of Employer Contributions Related to Health Care For the Years Ended June 30, 2007–2011 (dollar amounts in thousands)

Notes to Health Care Trend Data

Valuation date Jan. 1, 2011 Jan. 1, 2010Actuarial cost method Entry age Entry ageAmortization method Level percentage, open Level percentage, openRemaining amortization period 30.0 years 30.0 yearsAsset valuation method Fair market value Fair market valueActuarial assumptions: Investment rate of return 5.40% 5.00% Projected salary increases 12.00% at age 20 to 3.00% at age 65 12.00% at age 20 to 3.25% at age 65 Payroll increase 3.50% for next 8 years; 4.00% thereafter 3.50% for next 9 years; 4.00% thereafter Inflation assumption 3.00% 3.00% Trend rates 7.80%–11.00% initial; 5.00% ultimate 8.10%–11.60% initial; 5.00% ultimate

The information presented in the required supplemental schedules was determined as part of the actuarial valuations for the dates indicated. See accompanying independent auditors’ report.


Financial

Schedules of Administrative Expenses

For the Years Ending June 30, 2011 and 2010 2011 2010

Personnel

Salaries and wages $ 30,418,754 $ 30,472,029

Retirement contributions 4,273,598 4,164,990

Benefits 4,357,338 4,467,195

Total personnel 39,049,690 39,104,214

Professional and technical services

Computer support services 1,255,951 1,354,770

Health care services 869,529 736,383

Actuary 196,730 241,681

Auditing 219,376 113,647

Defined contribution administrative fees 902,253 894,124

Legal 167,504 172,776

Temporary employment services 67,174 9,471

Total professional and technical services 3,678,517 3,522,852

Communications

Postage and courier services 1,379,906 1,591,780

Printing and supplies 1,450,829 1,464,662

Telephone 416,582 404,868

Total communications 3,247,317 3,461,310

Other expenses

Equipment repairs and maintenance 4,203,255 4,889,230

Building utilities and maintenance 1,548,682 1,551,382

Transportation and travel 221,686 212,683

Recruitment fees 19,854 7,557

Equipment rental 19,080 19,080

Depreciation 7,494,545 7,374,542

Member and staff education 220,317 215,472

Insurance 726,946 678,620

Memberships and subscriptions 140,448 150,723

Ohio Retirement Study Council 255,626 235,598

Miscellaneous 376,339 384,268

Total other expenses 15,226,778 15,719,155

Total administrative expenses $ 61,202,302 $ 61,807,531

Note: Above amounts do not include investment administrative expenses, which are deducted from investment income and shown in a separate schedule on Page 34.

See accompanying independent auditors’ report.


Financial

Schedules of Investment Expenses For the Years Ending June 30, 2011 and 2010

2011 2010

Personnel

Salaries and wages $ 23,555,586 $ 19,004,506

Retirement contributions 3,064,710 2,483,275

Benefits 1,895,392 1,174,789

Total personnel 28,515,688 22,662,570

Professional and technical services

Legal 5 42,537

Investment research 2,636,695 2,414,195

Financial asset advisors 771,787 745,800

Banking fees 1,849,227 3,287,624

Total professional and technical services 5,257,714 6,490,156

Other expenses

Printing and supplies 4,959 4,162

Building utilities and maintenance 318,683 331,925

Travel 327,238 298,938

Investment quotation systems 1,368,820 1,306,280

Memberships and subscriptions 72,517 106,028

Miscellaneous 38,121 34,369

Total other expenses 2,130,338 2,081,702

Total investment expenses $ 35,903,740 $ 31,234,428


2011 2010

Asset class

Domestic common and preferred stock $ 11,512,629 $ 8,878,108

International 24,072,061 26,637,816

Fixed income 5,188,337 4,388,420

Alternative investments 77,870,472 69,891,634

Real estate 21,301,018 19,998,697

Total external manager fees $ 139,944,517 $ 129,794,675


Schedules of Fees to External Asset Managers by Asset Class For the Years Ending June 30, 2011 and 2010


Investments

Sluggish gains after the “Great Recession” continueDuring the first six quarters of the economic expansion that began in mid-2009, real gross domestic product grew at a solid 3% rate. However, business inventory growth accounted for roughly 40% of the advance in the economy — a situation that normally is not conducive to future economic growth because of the mismatch it creates between supply and demand. Growth in real final sales (economic activity excluding the change in inventories) was very weak at only 1.8%.

As soft as the underlying productive economy was during the first year-and-a-half of the economic expansion, it was about to worsen. Soaring energy and food costs ate away at discretionary consumer spending and geopolitical crises played out in the oil-producing Middle East. A severe earthquake and tsunami in Japan late in the third fiscal quarter contributed additional shocks to the U.S. and global economies. Real gross domestic produce (GDP) and real final sales grew just 0.8% at an annual rate in the second half of fiscal 2011. Increasingly, headline inflation was hurting real economic growth and damaging consumer confidence while the ongoing sovereign debt crisis in Europe threatened to stall the global economy. Domestic political impasses over raising the federal debt ceiling and reducing federal spending added to the shaky economic confidence in the United States, driving business and consumer confidence even lower as the fiscal year ended.

Because the housing sector will likely continue to see only slow progress into fiscal 2012 and government bodies increasingly face fiscal austerity, U.S. economic prospects will continue to be heavily dependent upon consumer spending, business fixed investment, and to some extent, international trade. The most important economic sector will be consumer spending and it will largely depend upon stronger employment and income gains. The unemployment rate remains very high and job growth needs to be much

Investment ReviewFor Fiscal Year July 1, 2010, through June 30, 2011Prepared by STRS Ohio’s Investments Associates

stronger to significantly improve labor conditions. However, because of ongoing deleveraging in the consumer and business sectors and the need to rebuild lost wealth from the housing and financial market collapses, growth in consumer spending will likely remain tepid in the coming fiscal year.

Business fixed investment will also need to be a major contributor to economic activity in the upcoming fiscal year. Though investment in structures will not likely add a great deal to economic activity, business spending on capital equipment has been robust and will need to continue. After the broad-based slowdown in fiscal 2010, both manufacturing and non-manufacturing activity soared for most of fiscal 2011. Larger companies did better than smaller companies, but even among small companies optimism moved into expansion territory before the end of the fiscal year. However, those strengths began to evaporate toward the end of the fiscal year from continuing shaky consumer and business confidence.

Foreign trade could improve modestly in fiscal 2012 after the trade-weighted dollar depreciated significantly during fiscal 2011. Though the terms of trade have improved from an U.S. perspective, economic growth is going to be relatively slow across countries. Most developed countries face ongoing structural constraints that should limit their potential economic growth while rapid growth in most emerging countries is softening because developed consumer markets are growing only slowly.

On the inflation front, commodity prices moved broadly higher, even accelerating the pace during the current fiscal year. Much of the increase can be attributed to the return of foreign demand for scarce energy, industrial and agricultural commodities to feed more rapidly-growing emerging economies. The increase in commodity prices led to a surge in producer prices, but it was only sparingly passed through to core consumer prices (consumer price index excluding volatile food and energy costs) or broader economy-wide


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measures of inflation. The threat from swelling commodity prices was offset somewhat by a huge output gap and low wage expectations. There is a great deal of excess capacity in the economy that has yet to be swallowed up by growing demand that would allow inflation pressures to stick. The recent surge in headline inflation indicators from largely energy and food costs should ease as the economy moves through fiscal 2012. Though there may continue to be geopolitical shocks in sensitive energy-producing regions in the upcoming year, core inflation will likely remain behaved.

Along with a renewed focus at the federal, state and local government levels toward fiscal austerity, the Federal Reserve’s campaign to support economic activity through more and more accommodative monetary policies is reaching an end. Interest rates will not likely be raised in fiscal 2012 because the unemployment rate will remain elevated and core inflation should stay below the Federal Reserve’s preferred rate of roughly 2%. Nevertheless, further quantitative easing will not extend into fiscal 2012 unless another crisis develops in major economies that then renews deflationary concerns. Regardless, a concerted move toward monetary policy tightening is likely about a year away given the expected slow improvement in economic fundamentals and the lack of a sustained threat to core inflation measures from energy and food costs.

There continues to be a variety of downside risks that will keep a lid on the economy’s expansion into fiscal 2012 — among them, the weak housing industry, continued deleveraging, modest hiring and bank lending, fiscal restraint and developments abroad — but cyclical growth prospects should improve from the very slow pace in the second half of fiscal 2011 toward a more moderate 2–2.5% trend around the economy’s longer-term potential. Yet, longer-term structural problems remain from developed countries that are adapting to slower longer-term growth prospects, leaving the global economy vulnerable to additional shocks from Europe’s and America’s debt problems, political unrest in the Middle East and even natural disasters like Japan has faced. As a result, positive cyclical trends and developments need to be tempered by longer-term concerns that could lead to further disappointment in economic growth.

Fixed income returns outperform benchmarkInterest rates generally remained low for fiscal year 2011 as the U.S. economy proved vulnerable to global external shocks and Federal Reserve policy anchored interest rates. The vulnerability of the U.S. economy became evident early in year when sovereign debt issues broadened in Europe, followed by unrest in the Middle East and disruptions from the earthquake in Japan. These events impacted consumer and business confidence and contributed to the ongoing sluggish economic recovery, limiting any meaningful rise in interest rates. The Federal Reserve has also maintained the federal funds rate near 0% for 30 months and a second round of quantitative easing resulted in purchases of approximately $850 million in U.S. Treasuries during the final eight months of the fiscal year.

The Barclays Capital U.S. Universal Index finished fiscal year 2011 with a 12-month return of 4.78%, essentially matching the long-term STRS Ohio fixed income policy return of 4.80%. The credit-sensitive sectors of the fixed income market performed relatively well for a second consecutive year, consistent with the recovery of risk assets in other asset classes. This group was led by high yield (+15.63%), emerging market debt (+12.14%), commercial mortgage-backed securities (+11.36%), and investment-grade corporate bonds (+6.29%). The non-credit sectors had lower returns with agency mortgage-backed securities (+3.81%), government-related (+3.72%), and U.S. Treasuries (+2.24%).

The STRS Ohio fixed income portfolio returned 5.18% versus the benchmark’s return of 4.78%. Over the three prior fiscal years, the STRS Ohio fixed income portfolio returned an annualized 7.74% versus the benchmark’s return of 6.74%. The STRS Ohio performance over the prior five fiscal years was an annualized 7.44% versus the benchmark’s 6.61%. A more complete report of STRS Ohio performance appears on Page 49.

Domestic equity returns soarFiscal year 2011 saw the U.S. equity market rise dramatically for the second consecutive year, as the economy and financial markets returned to health from the unprecedented declines caused by the 2008–2009 financial crises. From


the beginning of the fiscal year level of 1030.71, the S&P 500 gained 30.7% on a total return basis, closing the fiscal year at 1320.64.

The rise in the equity index outpaced only moderate U.S. economic growth. The strong market returns were largely driven by a continuation of strong corporate earnings growth. Stronger corporate earnings primarily resulted from better margins, rather than strong top-line growth. Earnings were buoyed by corporate cost controls as companies continued to do an exemplary job of belt-tightening and improving efficiency.

The STRS Ohio domestic equities portfolio returned 33.18% versus the Russell 3000 benchmark’s return of 32.37%. Over the three prior fiscal years, the STRS Ohio domestic equities portfolio returned an annualized 4.50% versus the benchmark’s return of 4.00%. The STRS Ohio performance over the prior five fiscal years was an annualized 3.15% versus the benchmark return of 3.35%. A more complete report of STRS Ohio performance appears on Page 49.

International markets remain strongThe international markets rose strongly for the second year in a row. The developed markets, as measured by the Morgan Stanley Capital International (MSCI) World ex US Index (50% hedged), rose 22.1% and the emerging markets, represented by the MSCI Emerging Markets Free (EMF) Index, were even stronger with an increase of 28.2%. The bulk of the appreciation came in the first six months of the fiscal year while the second half remained in a trading range with little progress seen. None of the risks identified last year: whether it be EU sovereign debt crises, U.S. mortgage crisis, or the inflation/deflation debate have been resolved. If anything, all risks have become more acute and it is actually becoming even more difficult to see any kind of benign resolution. Oddly, market volatility was relatively tame in the last 12 months — could this be the proverbial calm before the storm?

Returns for the 12 months were generally strong among the developed markets. The strongest markets were Austria (+55.3%), Norway (+53.0%), and New Zealand (+47.4%). The three smallest gains were seen in Greece (+3.0%), Israel (+8.2%),

and Japan (+13.2%). Currency played a major role in boosting U.S. dollar-based returns with the euro and yen appreciating by 19% and 9%, respectively. On a regional basis, Europe was the star, gaining over 30% with one-third from market appreciation and the other two-thirds from currency strength relative to the U.S. dollar. The Far East region was flattish but achieved high single digit returns through currency strength while North America (Canada) saw about 20% returns, split 50/50 between currency and market appreciation. Among the emerging markets, two markets generated returns in excess of 50%, including Argentina (+64.2%) and Poland (+57.8%), and the third best market was Russia (+45.4%). The weakest, and the only market with a negative return was Egypt (–12.0%), followed by Peru (+7.3%) and India (+8.0%). Like the developed markets, emerging Europe led the way with a nearly 40% appreciation while the Latin America and Asia regions generated returns exceeding 22%.

The STRS Ohio international portfolio returned 24.16% versus the benchmark’s return of 23.38%. Over the past three fiscal years, the STRS Ohio international portfolio returned an annualized 0.42% versus the benchmark’s return of –0.04%. The STRS Ohio performance over the prior five fiscal years was an annualized 3.78% versus the benchmark’s 3.18%. A more complete report of STRS Ohio performance appears on Page 49.

Commercial real estate in early stage of recoveryThe real estate market is recovering from the significant downturn experienced in 2008 and 2009. While the operating fundamentals of real estate, rents and occupancy have been improving, they have not recovered to the levels that current pricing would imply. As has been the case for the last several years, the capital markets have had the most impact on pricing and are ahead of the fundamentals. Top tier markets and assets have garnered much of the capital flow into the asset class resulting in rapid value recovery, in some cases to pre-crisis levels. Second tier markets have seen much less activity and, therefore, less value recovery.

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Real estate’s quick jump out of the gate will taper to reflect the more moderate pace of the overall economy. A sustainable real estate recovery is highly dependent on job growth and, if that wanes, so too will real estate property fundamentals. However, relative to other asset classes, real estate provides a strong income return with private market real estate enjoying a 6.4% income return in fiscal 2011. The real estate public market (REITs) with a total return of 35.57% in fiscal 2011 slightly outperformed the broader equity market. This comes after last fiscal year’s 55.46% return for the Wilshire REIT Index. We anticipate continued high volatility in REITs.

The STRS Ohio real estate total portfolio returned 22.66% versus the benchmark’s return of 19.46%. Over the three prior fiscal years, the STRS Ohio real estate total portfolio returned an annualized –3.84% versus the benchmark’s return of –0.33%. The STRS Ohio performance over the prior five fiscal years was an annualized 6.03% versus the benchmark’s 3.96%. A more complete report of STRS Ohio performance appears on Page 49.

Alternative investment returns continue rebound with the public market recoveryAlternative investment returns in fiscal 2011 reflected the continued improvement in the public markets and produced the second consecutive year of returns in excess of 20%. Although fiscal 2011 alternative investment returns did not match the returns generated by the public markets (the Russell 3000 Index produced a 32.37% return), the capital markets enabled the realization of investments through strategic sales and initial public offerings. In the private equity portfolio, this activity generated distributions that were sufficient to fund 99.5% of the capital called during fiscal 2011.

During fiscal 2011, further progress was made toward growing the opportunistic/diversified portfolio within alternative investments in response to the annual increases in its target allocation. The opportunistic/diversified allocation was 3% of total fund during fiscal 2011, increased to 4% on July 1, 2011, and will ultimately reach 5% on July 1, 2012. During fiscal 2011, $831 million of new opportunistic/diversified investments were made.

On June 30, 2011, the market value of investments in the opportunistic/diversified portfolio was $1.66 billion, or 2.51% of total fund, compared to $814 million, or 1.43% of total fund, at June 30, 2010. The allocation to private equity was set at 5% when the opportunistic/diversified allocation was established and has not changed. At the end of fiscal 2011, the actual allocation to private equity was 6.18%.

Over the long term, the private equity portfolio within alternative investments is targeted to earn 3% above the annualized return of the Russell 3000 Index, and the opportunistic/diversified portfolio is targeted to earn annualized returns equal to the Russell 3000 minus 1%. During fiscal 2011, the alternative investment portfolio produced a return of 20.43%, up from 20.04% during fiscal 2010 and rebounding from the negative return (–24.59%) produced during fiscal 2009. For fiscal 2011, the alternative investments five-year return was an annualized 8.64%, compared to the blended five-year return of 5.94% based on the long-term targeted rates of return for private equity and opportunistic/diversified described above and the targeted allocations during that period. A more complete report of STRS Ohio performance appears on Page 49.

Total fund beats the benchmark in fiscal 2011During fiscal 2011, the STRS Ohio fund returned 22.59% versus the benchmark’s (blended index of industry benchmarks) return of 22.36%. Over the three prior fiscal years, the STRS Ohio fund returned an annualized 2.93% versus the benchmark’s return of 3.32%. The STRS Ohio fund performance over the prior five fiscal years was an annualized 4.48% versus the benchmark’s 4.42%. A more complete report of STRS Ohio fund performance appears on Page 49.

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Statement of Investment Objectives and PolicyEffective Dec. 9, 2010

1.0 Purpose1.1 The State Teachers Retirement System of Ohio

(“STRS Ohio”) was established for the benefit of the teachers of the public schools of the State of Ohio. STRS Ohio is dedicated to partnering with STRS Ohio members to provide financial performance and member service that assures financial security for current and future retirees.

1.2 The State Teachers Retirement Board of Ohio (the “Board”) is vested with the operation and management of the State Teachers Retirement System of Ohio (“STRS Ohio”) (ORC Section 3307.04). The Board has the full power to invest the assets (the “Fund”) of STRS Ohio (ORC Section 3307.15). The Board is required to “. . . adopt in a regular meeting, policies, objectives or criteria for the operation of the investment program . . .” (ORC Section 3307.15).

1.3 To fulfill the statutory requirement of ORC Section 3307.15, the Board has adopted this Statement of Investment Objectives and Policy (the “Statement”) to govern the investment of the Fund. This Statement summarizes the objectives and policies for the investment of the Fund.

1.4 The Board has approved these objectives and policies after careful consideration of STRS Ohio benefit provisions, and the implications of alternative objectives and policies.

1.5 The Statement has been prepared with five audiences in mind: incumbent, new and prospective Board members; STRS Ohio investment staff; STRS Ohio active and retired members; Ohio General Assembly and Governor; and agents engaged by the Board to manage and administer the Fund.

1.6 The Board regularly, but in no event less than annually, will assess the continued suitability of this Statement, initiate change as necessary and update this Statement accordingly.

1.7 The Board may authorize its administrative officers and committees to act for it in accord with its policies (ORC Sections 3307.04 and 3307.15). The Board, no less frequently than annually, adopts a resolution delegating to the Executive Director and the Deputy Executive Director — Investments the authority to acquire, dispose, operate and manage the Fund, subject to the Board’s policies and to subsequent approval by

the Board. Consequently, the Executive Director, the Deputy Executive Director — Investments and the investment staff are responsible for preparing and maintaining numerous supporting management documents that govern the implementation of Board policies, including, but not limited to, individual investment manager mandates and guidelines, agent agreements and limited partnership documents.

1.8 In carrying out the operation and management of STRS Ohio, the Board, the Executive Director, his/her investment staff and others that are considered fiduciaries as defined in ORC Section 3307.01(K) are subject to various fiduciary responsibilities in ORC Chapter 3307, including those found in ORC Sections 3307.15, 3307.151, 3307.181 and 3307.18. This Statement incorporates, and is subject to, all of the provisions of ORC Chapter 3307.

1.9 The Board acknowledges its responsibilities under ORC Chapter 3307 and to the extent that this Statement is inconsistent with ORC Chapter 3307, Chapter 3307 shall control.

1.95 The Board approved this Statement on Dec. 9, 2010.

2.0 Investment Objective2.1 Subject to the Ohio Revised Code, the investment

objectives for the total fund are:

(a) to earn, over moving 20-year periods, an annualized return that equals or exceeds the actuarial rate of return (ARR) approved by the Board to value STRS Ohio liabilities. The current actuarial rate of return is 8.0%;

(b) to earn a rate of return that enables the System to meet pension liabilities and fulfill minimum funding requirements;

(c) to earn a rate of return that equals or exceeds the System’s long-term policy index with an acceptable level of risk; and

(d) maintain sufficient liquidity to satisfy cash flow needs.

2.2 The Board believes, based on the assumptions in this Statement, that the investment policies summarized in this Statement will achieve this long-term actuarial objective at an acceptable level of risk. The Board evaluates risk in terms of the probability of not achieving the ARR over a 20-year time horizon.

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3.0 Key Document Policy To assist the Board and the investment staff, the

following key documents will be produced or reviewed according to the schedule in Exhibit 1.

4.0 Asset Mix Policy, Risk Diversification and Return Expectations

4.1 After careful consideration of the investment objectives, liability structure, funded status and

liquidity needs of STRS Ohio, and the return, risk and risk-diversifying characteristics of different asset classes, the Board approved the asset mix policy presented in Exhibit 2. The exhibit also summarizes the Board’s return expectations for the asset mix policy and active management.

4.2 Seventy percent of the Fund is targeted for investment in equities, inclusive of alternative investments. Equity investments have provided the highest returns over long time periods, but can produce low and even negative returns over shorter periods.

4.3 The risk of low returns over shorter time periods makes 100% equity policies unsuitable for most pension funds, including STRS Ohio. By investing across multiple equity asset classes, and in lower return but less risky fixed-income and real estate, the Board is managing and diversifying total fund risk.

4.4 Forecasts of capital market and active management returns undertaken by the Board’s asset management consultant indicate that the Board’s investment policy summarized in Exhibit 2 has an expected 20-year annualized return of 8.1%. The expected 8.1% annualized return is 0.1% above the Board-approved 8.0% actuarial rate of return.

4.5 From the 2009 Asset Allocation Study, the 7.7% expected asset mix policy return was developed

Exhibit 1: Key Document Schedule

Key Document Document SourceReview

Schedule

Quarterly Performance Review

Board Consultant Quarterly

Statement of Investment Objectives and Policy/ Fund Governance

STRS Ohio Investment Staff/Reviewed by Board Consultant

Annually

Annual Plan (Includes Risk Budget)

STRS Ohio Investment Staff/Reviewed by Board Consultant

Annually

Actuarial Study Actuary/STRS Ohio Finance Department

Annually

Asset/Liability Study STRS Ohio Investment Staff/STRS Ohio Senior Staff/Board Consultant/Board

Every 3–5 years

Exhibit 2: Asset Mix Policy and Return Expectations for STRS Ohio Total Fund

Expected Expected Five-Year Expected Target Rebalancing 20-Year Management Total Asset Class Allocation4 Range Policy Returns1 Net Returns3 Return2

Equity Domestic 39.00% 30–50% 8.50% 0.25% 8.75% International 23.00% 18–30% 8.80% 1.00% 9.80% Alternatives 8.00% 3–13% 10.35% 10.35% Private Equity 5.00% 3–8% 11.50% 11.50% Opportunistic/Diversified 3.00%6 0–5% 7.50% 7.50%

Total Equity 70.00%

Fixed Income 19.00% 15–30% 4.80% 0.35% 5.15% Real Estate 10.00% 6–13% 6.50% 1.00% 7.50% Liquidity Reserve 1.00% 0–5% 3.40% 3.40%

Total Fund 5 100.00% 7.70% 0.40% 8.10%1 Based on the 2009 Asset Allocation Study.2 The 20-year return forecast is 8.1% per year.3 Individual asset classes are gross value added; the total fund is net value added. 4 The target allocation percentage is effective as of July 1, 2010.5 The Total Fund Blended benchmark is a blend of the asset class benchmarks based on the Total Fund’s target allocation for the respective asset

classes. Effective July 1, 2010, the Total Fund Blended benchmark will be calculated using 19% Barclays Capital U.S. Universal Bond Index, 39% Russell 3000, 23% International Blended Benchmark, 10% Real Estate Blended Benchmark, 8% Alternative Investment actual return and 1% 3-month Treasury Bill Index.

6 Opportunistic/Diversified target weight is scheduled to increase 1% per year until a max 5% target weight is obtained effective July 1, 2012.

with reference to the observed long-term relationships among major asset classes. The Board believes this return expectation is reasonable, but recognizes that the actual 20-year asset mix policy return can deviate significantly from this expectation — both positively and negatively. The volatility level associated with this asset mix is approximately 12.30%.

4.6 Fund assets are invested using a combination of passive and active management strategies. Active management of public market securities and real estate assets is expected to earn net 0.40% per annum of

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additional returns over moving five-year periods. The Board recognizes that unsuccessful active management can reduce total fund returns.

4.7 Investment objectives and guidelines for individual asset classes have been approved by the Board and are summarized below.

4.8 Liquidity reserves are kept at a minimum level, but sufficient to cover the short-term cash flow needs. STRS Ohio investment staff may utilize a derivative overlay to maintain the level at 1%.

4.9 The Board reviews at least annually its expectations for asset class and active management performance, and assesses how the updated expectations affect the probability that the Fund will achieve the established investment objectives.

5.0 Rebalancing5.1 Exposures to selected asset classes are actively

managed within the rebalancing ranges specified in Exhibit 2. Rebalancing ensures that the Fund’s actual asset allocation remains close to the target asset mix policy.

5.2 The Fund’s actual asset allocation is monitored at least monthly relative to established asset allocation policy targets and ranges. The timing and magnitude of rebalancing are decided with due consideration to the liquidity of the investments and the associated transaction costs.

5.3 In its Annual Investment Plan prepared for the Board, staff explains how it is managing asset class exposures based on short- and intermediate-term capital forecasts.

5.4 The impact of rebalancing decisions on total fund returns is included in investment performance reports to the Board.

6.0 Passive and Active Management Within Risk Budgets

6.1 STRS Ohio investment staff has been delegated the responsibility for managing the Fund’s exposure to passive and active investment strategies, subject to the constraint that active risk does not exceed Board-approved target risk budgets for the total fund and individual asset classes.

6.2 The Board has approved a target risk budget of .60% to 1.20%, with a working range of .20% to 1.60%, annualized for active management for the total fund. In exchange for assuming this level of active risk, the Board expects active management to add

net 0.40% of annualized excess return over moving five-year periods.

6.3 The Board realizes that actual management returns will likely be above or below the net 0.40% target over any five-year moving period, and therefore will evaluate the success of the STRS Ohio active management program within this context. The Board recognizes that any amount of management return in excess of the associated investment costs improves the security of STRS Ohio plan members.

6.4 Passive management uses low cost index funds to access the return streams available from the world’s capital markets. Indexed funds control costs, are useful tools for evaluating active management strategies, capture exposure to the more efficient markets and facilitate rebalancing to the policy asset mix.

6.5 Active management tries to earn higher returns than those available from index funds by making value-adding security selection and asset mix timing decisions. Unsuccessful active management earns below index fund returns.

6.6 Because there are no index fund products for real estate and alternative investments, these asset classes must be actively managed.

6.7 Aggregate short sale positions for all asset classes may not exceed 3% of total fund assets.

7.0 Global Equities — Domestic 7.1 Domestic equity is being managed relative to a

Board-approved risk budget range of .20% to 1.50%, and is expected to earn at least 0.25% of annualized excess return above the Russell 3000 Index over moving five-year periods.

7.2 Key elements of the strategy:

(a) The portfolio’s active management adds value primarily through security selection. Sector tilts by style, economic sectors or market capitalization are managed in accordance with the risk budget for domestic equities.

(b) The portfolio utilizes a variety of portfolio management approaches including quantitative and fundamental techniques to diversify the source of excess return.

(c) The portfolio utilizes a combination of internal and external management, utilizing multiple internal portfolio managers and multiple external manager firms to improve the likelihood of achieving excess returns, to diversify risk and to control costs.

Investments


7.3 Short sales may be used in the management of STRS Ohio domestic equity portfolios, but may not exceed 10% of the value of the asset class.

8.0 Global Equities — International 8.1 International equity is being managed relative to a

Board-approved risk budget range of 1.0% to 2.50%, and is expected to earn at least 1.0% of annualized excess return above a blended benchmark of 80% MSCI World ex US (50% hedged) and 20% MSCI Emerging Market Free Index over moving five-year periods.


(a) The portfolio emphasizes fundamental management approaches and exposures to security selection and country allocation decisions. These decisions have been shown to be the principal sources of the excess return in international equity portfolios. Managers have the ability to add value through currency management.

(b) Aggregate exposures to countries, currencies, equity styles and market capitalization are monitored and managed relative to their benchmark exposures.

(c) The portfolio utilizes a combination of internal and external management, with multiple internal portfolio managers and multiple external manager firms to improve the likelihood of achieving excess returns, to diversify risk and to control costs.

(d) STRS Ohio utilizes a 50% hedged benchmark on the developed markets portfolios in order to reduce the overall exposure to currency risk. With a 50% hedged benchmark, all developed market portfolios are generally hedged around the 50% benchmark level. Active currency positions are taken from time to time in some portfolios at the managers’ discretion. This is generally limited to 10 percentage points under or over hedged around the benchmark for the internal portfolios. Three-month currency forwards are the investment instrument generally used for hedges.

8.3 Short sales may be used in the management of STRS Ohio international equity portfolios, but may not exceed 10% of the value of the asset class.

9.0 Fixed Income9.1 Fixed income is being managed relative to a Board-

approved risk budget range of 0.1% to 1.50%, and

is expected to earn at least 0.35% of annualized excess returns above the Barclays Capital U.S. Universal Bond Index over moving five-year periods.

9.2 All of fixed income is actively managed because active management is generally low cost and market opportunities exist for skilled managers to generate excess returns.


(a) The portfolio will primarily be managed internally, with multiple external managers utilized in specialized segments of the market such as high yield and emerging market debt.

(b) The portfolio will emphasize issue selection, credit analysis, sector allocations and duration management.

(c) Aggregate exposures to duration, credit and sectors are monitored and managed relative to corresponding exposures in the asset class benchmark.

9.4 Short sales may be used in the management of STRS Ohio fixed-income portfolios, but may not exceed 10% of the value of the asset class.

10.0 Real Estate10.1 Real estate investments are being managed

relative to a Board-approved risk budget range of 2.00% to 7.00%, and are expected to earn at least 1.00% of annualized excess returns above a blended benchmark over moving five-year periods. The Real Estate Blended Benchmark is 85% NCREIF Property Index and 15% Wilshire Real Estate Trust Index.


(a) Real estate is 100% actively managed because index funds replicating the real estate broad market are not available. The portfolio is primarily managed internally. External managers are utilized primarily for specialized segments of the market. Direct property investments represent most of the real estate portfolio. Risk is diversified by investing across major property types and geographic areas.

(b) Leverage of up to and including 50%, in aggregate, is permitted for internally managed assets (excluding REITs).

(c) Publicly traded real estate investment trusts (REITs) are targeted at 15% of the real estate portfolio to enhance liquidity, diversification and excess returns.

Investments


(d) Non-core real estate investments are limited to 20% of the real estate portfolio. Investment strategies will be characterized as “opportunistic” based on the market conditions prevailing at the time of investment.

10.3 Short sales may be used in the management of REITs, but may not exceed 10% of the value of the asset class.

11.0 Alternative Investments (Private Equity and Opportunistic/Diversified)

11.1 Alternative investments involve separate allocations to private equity and opportunistic/diversified investments.

11.2 Private equity investments are being managed with the objective of earning at least 3% net of fees above domestic public equity markets (Russell 3000 Index) over very long time horizons, typically moving 10-year periods. Private equity investments are traded infrequently and, therefore, risk budget concepts are not applicable.

11.3 Key elements of the private equity strategy:

(a) Private equity investments are 100% actively managed because index funds are not available.

(b) Private equity risk is diversified by investing across different types of investments including, but not limited to, venture capital, leverage buyouts, mezzanine debt, sector and international funds.

(c) Private equity risk is also diversified by investing across vintage years, industry sectors, investment size, development stage and geography.

(d) Private equity investments are managed by general partners with good deal flow, specialized areas of expertise, established or promising net of fees track records and fully disclosed and verifiable management procedures.

11.4 Opportunistic/diversified investments are being managed with the objective of earning domestic public equity-like returns (approximately 1% net of fees below domestic public equity markets [Russell 3000 Index]) over very long time horizons, typically moving 10-year periods, but with the goal of downside protection during equity bear markets. Investments in this category can be liquid or illiquid and, therefore, risk budget concepts are not applicable.

11.5 Key elements of the opportunistic/diversified strategy:

(a) Opportunistic/diversified investments are tactical in nature and typically are actively managed because index funds would not be available.

(b) Downside protection during equity bear markets can be achieved and asset class risk is diversified by investing across different types of opportunistic/diversified investments primarily modeled on hedge funds, commodities and infrastructure, but can include current “opportunistic” investments such as commercial mortgage-backed securities, non-agency mortgages and distressed debt, and may include low volatility equity, defensive equity, emerging market equities, master limited partnerships, listed private equity, closed-end funds, diversified alpha/beta strategies, volatility strategies, local currency emerging market debt, bank loans, agricultural investing, managed futures, natural resources, green and energy investing, micro-finance institutions, etc.

(c) Opportunistic/diversified investments may be made directly, through specialist managers or through fund-of-funds.

12.0 Derivatives12.1 Derivatives may be used in the management of

STRS Ohio internal and external liquidity reserves, fixed-income, equity and real estate portfolios. Derivatives are typically, but not exclusively, futures contracts, equity swaps, credit default swaps, option contracts and option contracts on futures for market indexes. Options on individual securities, baskets of securities and equity-linked notes, and shorting for positioning purposes are further examples. Derivatives are both exchange traded and traded over the counter.

12.2 Derivative exposures must be of a hedging or positioning nature. As a percentage of Fund assets, the underlying exposure of all positioning derivatives will not exceed:

(a) 5% for fixed-income investments;

(b) 10% for domestic equity investments;

(c) 10% for international equity investments; and

(d) 1% for real estate investments.

Hedging derivatives will not be included in the limits above, but must be footnoted.

Investments


12.3 Any use of leverage will adhere to asset allocation restrictions and asset class active management risk range constraints.

13.0 Proxy Voting13.1 Common stock proxies are valuable and should be

voted in the best interest of STRS Ohio active and retired members.

13.2 The Board shall maintain stock proxy voting policies and has directed STRS Ohio investment staff and the proxy voting agents to use these policies as guidelines for voting common stock proxies held by the Fund.

14.0 Ohio Investments14.1 The Board will give due consideration to

investments that enhance the general welfare of the state and its citizens provided that assets are invested in the best interest of STRS Ohio active and retired members. Preference will be given to Ohio investments offering competitive returns at risk levels comparable to similar investments currently available to the Board.

14.2 STRS Ohio investment staff shall maintain and implement an Ohio Investment Plan. The plan shall set forth procedures to assure that a special effort will be made by the investment staff to examine and evaluate all legal investment opportunities in the state and, where policy criteria are satisfied, to acquire such investments.

15.0 Broker-Dealers15.1 Purchases and sales of publicly traded securities

shall be executed with broker-dealers from a list reviewed by the Board. In those rare situations where best execution cannot be achieved through a broker-dealer on the list, the Deputy Executive Director — Investments may approve the use of a broker-dealer not on the list.

15.2 Selection shall be based on an evaluation by the STRS Ohio investment staff as to financial soundness, underwriting capabilities, research services, execution capabilities and other factors required by the staff to fulfill its assigned investment responsibilities.

15.3 Specific transactions will be directed to the broker on that list most capable of providing brokerage services necessary to obtain both the best available price and the most favorable execution.

15.4 The Board shall give equal consideration to smaller Ohio-headquartered broker-dealers or smaller broker-dealers with at least one Ohio office and broker-dealers owned and controlled by minorities and/or women, provided the assets are transacted in the best interest of STRS Ohio members.

15.5 The Board has a goal to increase the use of Ohio-qualified broker-dealers for the execution of domestic equity and fixed-income securities transactions, when the services that Ohio-qualified broker-dealers provide are equal in quality, cost, scope and execution capabilities to all broker-dealers approved to transact securities transactions on behalf of the Board.

15.6 Each firm listed shall file with the Board on an annual basis such evidence of financial responsibility as required by the Board. This information shall include, but not be limited to, an audited financial statement.

15.7 When stocks are purchased during underwriting, allocations may be made to dealers not on the approved list provided the managing underwriter is so listed.

15.8 When entering into real estate transactions, the Board shall give equal consideration to Ohio firms providing associated professional services, minority-owned and controlled firms, and firms owned and controlled by women.

16.0 Securities Lending The Board may operate a securities lending

program to enhance the income of the Fund. The program must be operated by a bank trustee who follows the custodial requirements of the Treasurer of State and each security lent must be fully collateralized. Results of the program must be reported to the Board annually.

17.0 Securities Litigation Involvement in securities litigation is an

important responsibility for institutional investors with major public market exposure. The Board shall maintain a policy to determine the appropriate action to be taken when class action litigation is initiated against a company that generates a significant loss for the Board during the class period.

Investments


18.0 Security Valuation Valuation of investments shall be the total of:

(a) The primary closing price on the principal registered stock exchange for all common and preferred stocks so listed.

(b) The NASDAQ Official Closing Price (NOCP) as reflected by NASDAQ for common and preferred stocks not listed on a registered stock exchange.

(c) The current value as determined by a qualified independent service for all bonds, notes and certificates of indebtedness.

(d) Amortized cost for commercial paper, certificates of deposit, repurchase agreements and other short-term investments with a maturity of 270 or fewer days.

(e) The value of private direct real estate as determined by a valuation process consistent with GIPS standards; primary closing price on the principal registered stock exchange for all public real estate securities; and most recent external manager reported valuations updated to include current capital activity on externally managed funds.

(f ) The most recent external manager valuations for alternative investments updated to include current capital activity.

(g) International investments are valued by the subcustodian using relevant closing market prices and exchange rates.

19.0 Performance Monitoring and Evaluation19.1 The Board and its agents use a variety of compliance,

verification and performance measurement tools to monitor, measure and evaluate how well STRS Ohio assets are being managed. Monitoring, reporting and evaluation frequencies range from live real time performance, to daily, weekly, monthly, quarterly and annually.

19.2 The Board has developed a performance monitoring and evaluation system that answers two fundamental fiduciary questions:

(a) Are the assets being prudently managed? More specifically, are assets being managed in accordance with established laws, policies and procedures, and are individual investment managers in compliance with their mandates?

(b) Are the assets being profitably managed? More specifically, has performance affected benefit security, has capital market risk been rewarded and has active management risk been rewarded?

19.3 If there is a deviation from Board policies, STRS Ohio investment staff is required to provide the Board with a report explaining how the deviation was discovered, the reasons for the deviation, the impact on Fund performance, if any, and steps taken to mitigate future occurrences.

19.4 Exhibit 3 is an example of one of many reports used by the Board to monitor and evaluate performance of the total fund. Panel one indicates whether the total fund return exceeded the 8.0% actuarial rate of return. Panel two indicates whether the Fund was rewarded for investing in higher return but more risky equity investments. Panel three indicates whether active management added or subtracted returns.

19.5 Additional reports provide the Board with a multi-level view of investment activities at different levels and over different time horizons. These include:

(a) Performance of the total fund;

(b) Performance of individual asset class strategies;

(c) Performance of internal and externally managed portfolios; and

(d) Performance of individual external managers.

Exhibit 3: EXAMPLE Total Fund Trustee Summary Report, as of June 30, 2008

Experienced ReturnsAnnualized Rates of Return

1 Year 3 Years 5 Years 10 Years

Have returns affected funded ratio?1. Total fund return2. Actuarial discount rate3. Out/under-performance (1–2)

–5.44%8.00%

–13.44%

9.09%8.00%1.09%

11.40%8.00%3.40%

6.52%7.82%

–1.30%

Has plan been rewarded for capital market risk?4. Total fund benchmark return5. Minimum risk/high opportunity cost policy of 91-day T-Bills6. Impact of asset mix policy (4–5)

–5.79%2.90%

–8.69%

8.11%4.02%4.09%

10.38%3.06%7.32%

6.19%3.40%2.79%

Has plan been rewarded for active management risk?7. Active management return (1–4)8. Net active management return estimated

0.35%0.24%

0.98%0.87%

1.02%0.90%

0.33%0.22%

Investments


Statement of Fund GovernanceEffective Dec. 9, 2010

1.0 Purpose1.1 This Statement of Fund Governance (the

“Statement”) summarizes the governance structure established by the State Teachers Retirement Board of Ohio (the “Board”) to ensure the prudent, effective and efficient management of the assets of the State Teachers Retirement System of Ohio (“STRS Ohio”).

1.2 The fund governance structure was approved by the Board after careful consideration of alternative approaches to governing a very large and growing pension fund within an increasingly complex financial and investment environment.

1.3 The Statement has been prepared with five audiences in mind: incumbent, new and prospective Board members; STRS Ohio investment staff; STRS Ohio active and retired members; Ohio General Assembly and Governor; and agents engaged by the Board to manage, administer or advise on STRS Ohio assets.

1.4 The Statement summarizes more detailed policy and procedure documents prepared and maintained by STRS Ohio investment staff, and numerous other documents that govern the day-to-day management of STRS Ohio assets.

1.5 The Board regularly assesses the continued suitability of the STRS Ohio fund governance structure, initiates change as necessary and updates this Statement accordingly.

1.6 The Board may authorize its administrative officers and committees to act for it in accord with its policies (ORC Sections 3307.04 and 3307.15). The Board, no less frequently than annually, adopts a resolution delegating to the Executive Director and the Deputy Executive Director — Investments the authority to acquire, dispose, operate and manage the Fund, subject to the Board’s policies and to subsequent approval by the Board.

1.7 In carrying out the operation and management of STRS Ohio, the Board, the Executive Director, his/her investment staff and others that are considered fiduciaries as defined in ORC Section 3307.01(K) are subject to various fiduciary responsibilities in ORC Chapter 3307,

including those found in ORC Sections 3307.15, 3307.151, 3307.181 and 3307.18. This Statement incorporates, and is subject to, all of the provisions of ORC Chapter 3307.

1.8 The Board acknowledges its responsibilities under ORC Chapter 3307 and to the extent that this Statement is inconsistent with ORC Chapter 3307, Chapter 3307 shall control.

1.9 The Board approved this Statement on Dec. 9, 2010.

2.0 Governance Principles2.1 Three principles guided the Board’s development

of the STRS Ohio fund governance structure:

(a) As STRS Ohio governing fiduciary, the Board is ultimately accountable for all investment decisions. Section 3307.15 of the Ohio Revised Code (the “Code”) vests the investment function in the Board and requires the Board to “. . . adopt, in regular meetings, policies, objectives, or criteria for the operation of the investment program . . .” Section 3307.15 of the Code sets forth the fiduciary responsibility of the Board in discharging its duties with respect to the fund.

(b) To ensure STRS Ohio assets are prudently, profitably and efficiently managed on a day-to-day basis, the Board needs to delegate the management and implementation of Board investment policies to qualified managing and operating fiduciaries. Sections 3307.04 and 3307.15 of the Code empower the Board to authorize its committees and administrative officers to act for it in accord with Board policies. The fiduciary responsibility of Board delegates in discharging their duties with respect to the fund is specified in Section 3307.15.

(c) To ensure effective oversight of delegates, the Board requires informative and timely performance reports that reveal if managing and operating fiduciaries have complied with established policies, and indicate how assets under their care have performed relative to Board-approved investment objectives.

Investments


3.0 Investment Decisions Retained by the Board

3.1 The Board approves the following investment policies:

(a) Statement of Investment Objectives and Policy, which includes the following:

(i) Total fund risk and return objectives;

(ii) Total fund target asset mix policy;

(iii) Total fund asset mix policy rebalancing ranges;

(iv) Active management risk and return objectives at the total fund and asset class levels; and

(v) Performance measurement criteria and evaluation standards.

(b) Proxy voting;

(c) Ohio investments;

(d) Securities lending;

(e) Broker-dealer selection criteria and procedures;

(f ) Ohio-qualified investment managers and brokers; and

(g) Securities litigation.

3.2 Before approving or amending policy decisions, the Board seeks advice, guidance and recommendations from STRS Ohio investment staff, Board-retained investment consultants, and other experts or sources as considered prudent by the Board.

4.0 Investment Decisions Delegated to Investment Staff

4.1 The Board, through the Executive Director, has delegated to qualified STRS Ohio investment staff the following investment management and implementation decisions:

(a) Buying, selling, managing and monitoring individual securities, real assets and/or other investment transactions to achieve the total fund and asset class investment objectives approved by the Board;

(b) Retaining, managing and terminating external investment managers within each asset class as required to achieve the total fund and asset class investment objectives approved by the Board;

(c) Ensuring total fund, asset class and individual manager portfolios comply with established parameters and risk levels; and

(d) Preparing, negotiating and executing external investment manager mandates, guidelines and fee agreements.

4.2 In making these decisions, STRS Ohio investment staff seeks the advice, guidance and recommendations of Board-retained investment consultants, external investment managers, and other experts and sources as considered prudent by STRS Ohio staff.

5.0 Board Oversight5.1 The Board requires investment staff to prepare

and deliver an Annual Investment Plan that explains how STRS Ohio assets will be managed in order to achieve the Board-established investment objectives. This provides the Board a focused opportunity to:

(a) Question and comment on staff’s investment management plans;

(b) Request additional information and support about staff’s investment intentions; and

(c) Express its confidence in the Annual Investment Plan.

5.2 The Board meets at least quarterly to assess how assets are being managed relative to the Annual Investment Plan, to monitor and evaluate investment performance relative to objectives and to address other investments issues as are warranted.

5.3 The Board approves the criteria and standards for monitoring and evaluating the impact different investment decisions have on total fund, asset class and manager-level performance. Performance is monitored and evaluated with respect to risk and return objectives established by the Board.

(a) Investment risks are monitored and evaluated quarterly by comparing total fund and asset class risk characteristics relative to suitable benchmarks.

(b) Investment returns are monitored monthly and evaluated quarterly by comparing total fund and asset class returns relative to suitable benchmarks.

5.4 Before approving or amending the criteria for monitoring and evaluating investment decisions, the Board seeks advice, guidance and recommendations from STRS Ohio investment staff, Board-retained investment consultants, and other experts and sources as considered prudent by the Board.

Investments


Investments

Vincent Performance Services LLC 2014 NE Broadway Street Portland, OR 97232 Tel: 503-288-2704 Fax: 503-548-4435 www.vincentperformance.com

State Teachers Retirement System of Ohio 275 E. Broad Street Columbus, OH 43215-3771

We have verified whether State Teachers Retirement System of Ohio (“STRS Ohio”) (1) complied with all the composite construction requirements of the Global Investment Performance Standards (GIPS®) on a firm-wide basis for the period from July 1, 2006 through June 30, 2011, and (2) designed its policies and procedures to calculate and present performance in compliance with the GIPS standards as of June 30, 2011. STRS Ohio’s management is responsible for compliance with the GIPS standards and the design of its policies and procedures. Our responsibility is to express an opinion based on our verification. We conducted this verification in accordance with the verification procedures set forth in the GIPS standards and the Guidance Statement on Verification. We also conducted such other procedures as we considered necessary in the circumstances.

In our opinion, State Teachers Retirement System of Ohio has, in all material respects: Complied with all the composite construction requirements of the GIPS standards on a

firm-wide basis for the period from July 1, 2006 through June 30, 2011, and Designed its policies and procedures to calculate and present performance in compliance

with the GIPS standards as of June 30, 2011.

Since our verification was designed to form an opinion on a firm-wide basis this report does not relate to any composite compliant presentation of STRS Ohio and does not ensure the accuracy of any specific composite compliant presentation, including what is reflected in this Comprehensive Annual Financial Report.

Karyn D. Vincent, CFA, CIPM Vincent Performance Services LLC August 19, 2011


Investment Performance (total returns, annualized on a fiscal-year basis, July 1–June 30)

1-Year Returns (2011)1

Asset Category STRS Ohio Return Index Name Index Return Domestic Equities6 33.18% Russell 3000 32.37% International6 24.16% International Equity Blended Benchmark2 23.38% Fixed Income6 5.18% Barclays Capital U.S. Universal Index 4.78% Real Estate6 22.66% Real Estate Blended Benchmark3 19.46% Alternative Investments6 20.43% Alternative Investment Blended Benchmark4 –

Total Fund 22.59% Total Fund Blended Benchmark5 22.36% 3-Year Returns (2009–2011) Asset Category STRS Ohio Return Index Name Index Return Domestic Equities6 4.50% Russell 3000 4.00% International6 0.42% International Equity Blended Benchmark2 –0.04% Fixed Income6 7.74% Barclays Capital U.S. Universal Index 6.74% Real Estate6 –3.84% Real Estate Blended Benchmark3 –0.33% Alternative Investments6 2.92% Alternative Investment Blended Benchmark4 –

Total Fund 2.93% Total Fund Blended Benchmark5 3.32%

5-Year Returns (2007–2011) Asset Category STRS Ohio Return Index Name Index Return Domestic Equities6 3.15% Russell 3000 3.35% International6 3.78% International Equity Blended Benchmark2 3.18% Fixed Income6 7.44% Barclays Capital U.S. Universal Index 6.61% Real Estate6 6.03% Real Estate Blended Benchmark3 3.96% Alternative Investments6 8.64% Alternative Investment Blended Benchmark4 5.94%

Total Fund 4.48% Total Fund Blended Benchmark5 4.42% STRS Ohio Long-Term Policy Objective (20 Years) Total Fund: 8.10%

State Teachers Retirement System of Ohio claims compliance with the Global Investment Performance Standards (GIPS®). To receive a compliant presentation and/or a description of the firm’s composite, please contact the STRS Ohio Communication Services Department at (614) 227-2825.

State Teachers Retirement System of Ohio is defined and created by the Ohio Revised Code, Chapter 3307.15. The STRS Ohio Total Fund performance returns consist of all assets of the fund, including both internally and externally managed accounts. All returns are calculated in U.S. dollars using a time-weighted rate of return. All returns are net of brokerage commissions, expenses related to trading, and applicable foreign withholding taxes on dividends, interest and capital gains. Performance is generally gross of fees; net of fees returns are available upon request. Investment management fees vary among asset class. All measurements and comparisons have been made using standard performance evaluation methods, and results are presented in a manner consistent with the investment industry in general and public pension funds in particular.

The Total Fund reflects an asset allocation to six primary asset classes. As of June 30, 2011, the actual asset allocation is as follows: Liquidity Reserves 7.0%, Fixed Income 17.5%, Domestic Equities 36.9%, International Equities 21.7%, Real Estate 8.2% and Alternative Investments 8.7%. The investment objective for the Total Fund is to earn, over moving 20-year periods, an annualized return that equals or exceeds the actuarial rate of return, approved by the State Teachers Retirement Board (“Board”) to value STRS Ohio liabilities. As of June 30, 2011, the current actuarial rate of return is 8.0%.

As part of the Total Fund strategy, certain asset classes may use derivatives and/or leverage. The following asset classes may use derivatives and/or leverage to gain exposure to certain sectors of the market:

• FixedIncome:Exposuretoderivativesforinternallymanagedfixed-incomeinvestmentsmaynotexceed5%ofTotalFundassets.Avarietyofderivativesmaybeusedtoadjusttheexposuretointerestrates,individual securities or to market sectors in the fixed-income asset class.

• DomesticEquities:Exposuretoderivatives,including,butnotlimitedto,futures,stockoptionsandindexoptionsmaynotexceed10%ofTotalFundassets.

• InternationalEquities:Exposuretoderivatives,includingswapagreements,maynotexceed10%ofTotalFundassets.

• RealEstate:Activitiesmayincludeborrowingfundsonasecuredorunsecuredbasiswithleveragelimitedto50%oftheinternallymanageddirectrealestateassets.AtJune30,2011and2010,debtasapercentageof these assets was 27.5% and 33%, respectively. Derivatives may also be used and cannot exceed 1% of Total Fund assets.

1The one-year returns for the fiscal years ended June 30, 2011, 2010, 2009, 2008 and 2007, have been examined by Vincent Performance Services LLC. A copy of the examination report is available upon request.2The International Equity Blended Benchmark is calculated using 80% of the MSCI World ex USA Index (50% hedged) and 20% of the MSCI EMF Index.3The Real Estate Blended Benchmark is calculated quarterly using 85% NCREIF Property Index (NPI) and 15% Wilshire REIT Index for all periods beginning on or after Oct. 1, 2007, and 80% NPI, 10% NCREIF Timberland Index and 10% Dow Jones Wilshire REIT Index for periods prior to Oct. 1, 2007. 4The Alternative Investment Blended Benchmark is calculated monthly using 62.5% of the Russell 3000 Index plus 3% and 37.5% of the Russell 3000 Index minus 1% effective July 1, 2010; 71.4% of the Russell 3000 Index plus 3% and 28.6% of the Russell 3000 Index minus 1% effective July 1, 2009; and the Russell 3000 Index plus 3% for periods prior to July 1, 2009. Given the long-term nature of the asset class, no benchmark return for alternative investments is displayed for the one- and three-year periods.5The Total Fund Blended Benchmark is calculated and rebalanced monthly using a blend of the asset class benchmarks based on the Total Fund’s policy weights in effect during the respective period. For alternative investments, however, the actual alternative investments return is used in the calculation of the Total Fund Blended Benchmark. Information concerning asset class benchmarks and policy weights is available upon request.6Returns are supplemental to the Total Fund composite returns.

Investments


Summary of Investment Assets As of June 30, 2011 and 2010 (dollar amounts in thousands)

June 30, 2011 June 30, 2010 Fair Value % Fair Value %

Short term Commercial paper $ 4,334,154 6.37% $ 3,078,470 5.24% Short-term investment funds 33,000 0.05% 49,000 0.08% Total short term 4,367,154 6.42% 3,127,470 5.32% Fixed income U.S. government agency obligations and U.S. government obligations 3,276,029 4.82% 4,670,121 7.94% Corporate bonds 4,626,038 6.80% 4,207,714 7.16% High yield and emerging market 1,252,280 1.84% 1,110,016 1.89% Mortgages and asset-backed 4,064,050 5.98% 4,070,661 6.93% Total fixed income 13,218,397 19.44% 14,058,512 23.92% Domestic common and preferred stock 24,406,336 35.90% 19,530,128 33.23% Real estate East region 2,361,152 3.47% 2,201,662 3.75% Midwest region 1,093,349 1.61% 970,248 1.65% South region 567,740 0.83% 591,811 1.01% West region 1,429,065 2.10% 1,274,687 2.17% REITs 819,738 1.21% 719,420 1.22% Other 853,631 1.26% 876,266 1.49% Total real estate 7,124,675 10.48% 6,634,094 11.29% Alternative investments 5,920,652 8.71% 4,133,488 7.03% International 12,955,372 19.05% 11,290,445 19.21% Total investments $ 67,992,586 100.00% $ 58,774,137 100.00%

Investment asset schedule excludes invested securities lending collateral.

Investments


Fixed income $ 97,071 Common stock 703,667 Alternative investments 182,380 Real estate 148,799 Total Ohio-headquartered investments $1,131,917

STRS Ohio continues to engage in quality Ohio investments. As of June 30, 2011, STRS Ohio investments in companies with headquarters in Ohio are valued at more than $1.1 billion.

Schedule of U.S. Stock Brokerage Commissions Paid (for the year ended June 30, 2011)

Shares Commissions Avg. Cents Brokerage Firm Traded* Paid Per Share

ITG, Inc. 45,627,122 $ 881,007 1.9UBS Investment Bank 35,963,947 699,476 1.9JP Morgan Securities 15,777,121 678,261 4.3Deutsche Bank Securities 47,897,727 615,045 1.3Barclays Capital 17,162,045 593,361 3.5Cantor Fitzgerald 20,465,416 584,076 2.9Morgan Stanley 23,925,296 551,280 2.3Citigroup 13,047,456 531,537 4.1Liquidnet Inc. 24,486,625 417,977 1.7Credit Suisse Securities 15,315,374 401,441 2.6Banc of America Securities 10,305,438 398,187 3.9Bernstein (Sanford C.) & Company 8,337,959 386,713 4.6Cowen & Company 9,836,391 360,984 3.7Goldman Sachs 15,391,183 355,956 2.3Baird (Robert) & Company 8,894,916 332,635 3.7Instinet 46,627,120 322,482 0.7RBC Capital Markets 9,211,164 286,332 3.1Susquehanna Financial Group 13,347,445 271,186 2.0Jefferies & Company 7,163,528 264,108 3.7ICAP Corporates LLC 8,919,115 244,937 2.7Piper Jaffray 5,916,844 229,665 3.9Wells Fargo Securities 4,665,697 201,903 4.3State Street Global Markets 6,621,285 198,066 3.0International Strategy & Investment Group Inc. 3,688,505 182,871 5.0Oppenheimer & Company 3,946,441 167,511 4.2Others (includes 82 brokerage firms and external managers) 231,978,959 6,007,332 2.6 Total 654,520,119 $16,164,329 2.5 *Includes option equivalent shares Excludes commissions on futures trading

Investment Distribution by Fair Value — as of June 30, 2011

Ohio Investment Profile — as of June 30, 2011 (in thousands)

Domestic Equities: 35.90%

Fixed Income: 19.44%

International: 19.05%

Real Estate: 10.48%

Alternative Investments: 8.71%

Short-Term Investments: 6.42%

Investments


Domestic Equities — Top 20 Holdings Shares Fair Value

Exxon Mobil Corp. 8,425,197 $ 685,642,532 Apple Computer Inc. 1,903,800 $ 639,048,546 General Electric Co. 17,813,800 $ 335,968,268 Microsoft Corp. 11,389,700 $ 296,132,200 Philip Morris International 4,329,400 $ 289,074,038 Oracle Systems Corp. 8,608,441 $ 283,303,793Chevron Corp. 2,747,979 $ 282,602,160 International Business Machines Corp. 1,628,900 $ 279,437,795 AT&T Inc. 8,827,682 $ 277,277,491 Procter & Gamble Co. 4,196,686 $ 266,783,329 JPMorgan Chase & Co. 6,120,312 $ 250,565,573 PepsiCo Inc. 3,441,230 $ 242,365,829 Wells Fargo Co. 8,479,594 $ 237,937,408 Johnson & Johnson 3,087,200 $ 205,360,544 Pfizer Inc. 9,927,600 $ 204,508,560 Coca Cola Co. 2,984,700 $ 200,840,463 Citigroup Inc. 4,496,440 $ 187,231,762 Qualcomm Inc. 3,139,600 $ 178,297,884 Merck & Co. Inc. 4,786,771 $ 168,925,149 Google Inc. 319,900 $ 161,990,962

Schedule of Largest Investment Holdings* (as of June 30, 2011)

International Equities — Top 20 Holdings Shares Fair Value

Vodafone (United Kingdom) 52,740,803 $ 139,964,082 Rio Tinto (United Kingdom) 1,503,094 $ 108,362,209 Astrazeneca (United Kingdom) 2,047,746 $ 102,177,225 Novartis AG (Switzerland) 1,453,657 $ 88,911,325 Total SA (France) 1,394,521 $ 80,631,174 GlaxoSmithKline (United Kingdom) 3,686,106 $ 78,944,278 British American Tobacco (United Kingdom) 1,785,141 $ 78,269,261 Sanofi-Aventis (France) 956,055 $ 76,847,346 Royal Dutch Shell (United Kingdom) 1,995,844 $ 71,069,808 Siemens (Germany) 507,592 $ 69,692,737 Samsung Electronics (South Korea) 88,197 $ 68,234,648 BNP Paribas (France) 846,349 $ 65,317,375 Repsol YPF (Spain) 1,852,175 $ 64,287,855 Taiwan Semiconductor (Taiwan) 25,389,355 $ 63,819,222 Bayerische Motoren Werke (Germany) 633,553 $ 63,205,851 ING (Netherlands) 5,122,627 $ 63,048,105 Koninklijke Philips Electronics (Netherlands) 964,460 $ 62,581,873 Roche (Switzerland) 370,237 $ 61,867,394 Munchener Rueckvers (Germany) 382,334 $ 58,453,736 Daimler AG (Germany) 769,219 $ 57,881,547

Fixed Income — Top 20 Holdings Par Value Fair Value

U.S. Treasury N/B, 1.000%, due 12/31/2011, AAA 148,630,000 $ 149,273,568U.S. Treasury N/B, 2.375%, due 08/31/2014, AAA 129,300,000 $ 135,299,520U.S. Treasury N/B, 1.000%, due 10/31/2011, AAA 128,400,000 $ 128,787,768U.S. Treasury N/B, 2.125%, due 11/30/2014, AAA 115,100,000 $ 119,384,022U.S. Treasury N/B, 4.250%, due 11/15/2040, AAA 106,688,000 $ 104,299,256U.S. Treasury N/B, 2.625%, due 11/15/2020, AAA 105,550,000 $ 101,642,539FNMA Pool #AH5583, 4.500%, due 02/01/2041, AAA 94,278,201 $ 97,699,557U.S. Treasury N/B, 0.875%, due 01/31/2012, AAA 97,250,000 $ 97,675,955AMXCA 2009-2 A (8/15/2014), 1.437%, due 03/15/2017, AAA 93,005,000 $ 96,156,009Freddie Mac, 1.375%, due 01/09/2013, AAA 91,400,000 $ 92,718,902FNMA Pool #735578, 5.000%, due 06/01/2035, AAA 86,188,136 $ 91,978,255FHLMC GOLD 15YR #G13815, 4.500%, due 05/01/2025, AAA 85,620,160 $ 90,742,814U.S. Treasury N/B, 3.250%, due 06/30/2016, AAA 82,950,000 $ 88,996,225CSFB 2004-C1 A4, 4.750%, due 01/15/2037, AAA 82,617,000 $ 86,437,210FNMA Pool #960605, 5.000%, due 08/01/2037, AAA 80,832,072 $ 86,262,370U.S. Treasury N/B, 3.000%, due 09/30/2016, AAA 79,250,000 $ 83,802,912FHLMC GOLD #A97047, 4.500%, due 02/01/2041, AAA 72,475,706 $ 74,995,686FHLMC 10/20 #H09112, 5.500%, due 11/01/203 , AAA 68,558,540 $ 73,515,323U.S. Treasury N/B, 2.375%, due 09/30/2014, AAA 70,120,000 $ 73,383,385FNMA Pool #AE9681, 4.000%, due 12/01/2040, AAA 73,014,522 $ 73,137,186

*A complete list of investment holdings is available from STRS Ohio.

Investments


Schedule of External Managers (as of June 30, 2011)

Domestic Equity

Large Cap Enhanced Intech Small Cap Chartwell Investment Partners Neuberger Berman Eagle Asset Management Fuller & Thaler Asset Management Lord, Abbett & Company M.A. Weatherbie & Company Next Century Growth Investors

International

EAFE Arrowstreet Capital Alliance Bernstein Marvin & Palmer Associates Emerging Market First State Investments Genesis Asset Managers Marvin & Palmer Associates Alliance Bernstein

Fixed Income

High Yield Pacific Investment Management Company Oaktree Capital Management Emerging Market Pyramis Global Advisors Stone Harbor Investment Partners

Investments


Actuarial


Annual Rates of Separation and Salary Increase

Non-Vested Vested Salary Age Withdrawal Withdrawal Mortality Disability Increase* MEN 20 24.70% 15.00% .02% .01% 12.00% 25 13.60% 15.00% .03% .01% 12.00% 30 12.75% 3.20% .04% .02% 8.00% 35 14.50% 2.61% .06% .04% 7.25% 40 13.75% 2.16% .09% .10% 6.00% 45 13.40% 1.90% .13% .18% 5.25% 50 13.40% 1.80% .29% .24% 4.50% 55 13.40% 1.80% .40% .30% 4.00% 60 13.40% 1.80% .52% .35% 3.50% 65 13.40% — .85% .40% 3.25% WOMEN 20 19.50% 20.00% .01% .02% 12.00% 25 9.99% 19.00% .01% .02% 12.00% 30 9.99% 6.40% .02% .02% 8.00% 35 11.75% 3.60% .03% .07% 7.25% 40 9.00% 2.25% .04% .12% 6.00% 45 9.00% 1.80% .06% .17% 5.25% 50 9.00% 2.00% .10% .24% 4.50% 55 9.00% 2.40% .21% .30% 4.00% 60 7.25% 2.40% .40% .35% 3.50% 65 7.25% — .70% .40% 3.25%

*Includes an inflation adjustment of 3.00%.

Statement of Actuarial Assumptions and MethodsThe assumptions below have been adopted by the State Teachers Retirement Board after consulting with the actuary.

Financing Objective: To establish contributions as a level percentage of active member payroll which, when invested, will be sufficient to provide specified benefits to STRS Ohio members and retirees.

Interest Rate: 8% per annum, compounded annually. (Adopted 2003)

Mortality Rates: According to the RP 2000 Combined (Projection 2018 — Scale AA). Males’ ages are set back two years. Females younger than age 85 are set back three years, while females age 85 and over are set back two years. Special mortality tables are used for the period after disability retirement. (Adopted 2008)

Future Expenses: The assumed interest rate is net of the anticipated future administrative expenses of the fund.

Actuarial Cost Method: Projected benefit method with level percentage entry age normal cost and open-end unfunded accrued liability. Gains and losses are reflected in the accrued liability.

Asset Valuation Method: A four-year moving market average value of assets that spreads the difference between the actual investment income and the expected income (based on the valuation interest rate) over a period of four years. The actuarial value shall not be less than 91% or more than 109% of market value. (Adopted 1997)

Payroll Growth: 3.50% per annum compounded annually for the next seven years, 4.00% thereafter. (Adopted 2008)

Separations From Active Service and Salary Increases: Representative values of the assumed rates of separation and annual rates of salary increase are shown in the table below. (Adopted 2008)

Replacement of Retiring Members: The majority of members who retire do so effective July 1. These members are replaced by new members who are hired after July 1. As a result, new members are not reported on the census data. To compensate for this disparity, assumed payroll for these new members is equal to the difference between actual total system payroll for the fiscal year just ended and reported payroll for members reported on the valuation date.

Census and Assets: The valuation was based on members of the system as of July 1, 2011, and does not take into account future members. All census and asset data was supplied by the system.

Definition of Active Member: Members employed on July 1, 2011, who have earned at least 0.25 years of service or were employed on or after Jan. 1, 2011, and have less than 0.25 years of service, are considered active.

Marital Status: 80% of male members and 60% of female members are assumed to be married, with husbands assumed to be three years older than their spouse.

Retirement Rates

Under 25 Years 25–29 Years 30–34 Years 35+ Years Age of Service of Service of Service of Service MEN 52 0% 0% 20% 40% 55 0% 18% 12% 60% 60 13% 9% 15% 45% 65 17% 20% 10% 30% 70 12% 15% 10% 20% 75 100% 100% 100% 100% WOMEN 52 0% 0% 20% 80% 55 0% 14% 12% 50% 60 22% 15% 25% 40% 65 20% 32% 25% 45% 70 12% 20% 15% 35% 75 100% 100% 100% 100%

Actuarial


Schedule of Valuation Data — Retirees/Beneficiaries, 2002–2011

Annual % Increase Valuation Allowances in Annual Average Annual Date Number (in thousands) Allowances Allowances 2002 105,300 $2,806,482 8% $26,652 2003 108,294 $3,021,825 8% $27,904 2004 111,853 $3,272,078 8% $29,253 2005 115,395 $3,540,241 8% $30,679 2006 119,184 $3,828,395 8% $32,122 2007 122,934 $4,124,657 8% $33,552 2008 126,506 $4,418,799 7% $34,930 2009 129,659 $4,706,964 7% $36,303 2010 133,103 $4,957,960 5% $37,249 2011 138,088 $5,393,372 9% $39,057

Schedule of Valuation Data — Active Members, 2002–2011

Annualized Valuation Salaries Annual % Increase Date Number (in thousands) Average Pay in Average Pay 2002 178,557 $8,063,134 $45,157 4% 2003 179,944 $8,425,838 $46,825 4% 2004 179,063 $8,646,404 $48,287 3% 2005 176,692 $8,757,200 $49,562 3% 2006 175,065 $8,894,400 $50,806 3% 2007 174,110 $9,051,842 $51,989 2% 2008 173,327 $9,187,562 $53,007 2% 2009 174,807 $9,502,701 $54,361 3% 2010* 180,975 $9,633,355 $53,230 –2% 2011 177,897 $9,609,723 $54,018 1%

Benefit Recipients Added to and Removed From the Rolls, 2004–2011

Beginning Beginning Ending Ending Fiscal Number of Annual Benefit Payments Benefit Payments Number of Annual Year Benefit Allowances Recipients Added Recipients Removed Benefit Allowance Ended Recipients (in thousands) Added (in thousands) Removed (in thousands) Recipients (in thousands) 2004 108,294 $3,021,825 7,038 $310,262 3,479 $60,009 111,853 $3,272,078 2005 111,853 $3,272,078 6,929 $330,284 3,387 $62,121 115,395 $3,540,241 2006 115,395 $3,540,241 7,194 $354,245 3,405 $66,091 119,184 $3,828,395 2007 119,184 $3,828,395 7,289 $370,503 3,539 $74,241 122,934 $4,124,657 2008 122,934 $4,124,657 7,182 $373,385 3,610 $79,243 126,506 $4,418,799 2009 126,506 $4,418,799 6,675 $366,645 3,522 $78,480 129,659 $4,706,964 2010 129,659 $4,706,964 7,089 $334,654 3,645 $83,658 133,103 $4,957,960 2011 133,103 $4,957,960 7,744 $501,900 2,759 $66,488 138,088 $5,393,372

Actuarial

*For valuations prior to July 1, 2010, active members are defined as participants who earned 0.25 years of service credit or more, in the valuation year. Starting with the July 1, 2010 figures, active members are defined as participants who earned 0.25 years of service credit or more in the valuation year and those employed on or after Jan. 1, with less than 0.25 years of service.


Analysis of Financial Experience Gains and Losses in Accrued Liabilities Resulting From Differences

Between Assumed Experience and Actual Experience (in thousands)

Gain (loss) for year ended June 30: Type of Activity: 2011 2010 2009 2008 2007 Investment income. If there is greater investment income than assumed, there is a gain. If less, there is a loss. $ 588,454 $ (731,414) $ (17,353,396) $ (593,933) $5,865,787 Payroll growth. If more contributions from payroll growth are received than expected, there is a gain. If less, there is a loss. (77,193) (30,530) (35,590) (55,621) (312,644) Salary increases. If there are smaller salary increases than assumed, there is a gain. If greater increases, there is a loss. 680,760 404,084 133,050 327,750 54,930 Retirement and other separation experience. If members retire from service at an older age or with a lower final average salary than assumed, there is a gain. If separation claims are less than expected, there is a gain. If new members don’t enter the system as expected, there is a loss. (535,829) (664,659) (493,354) (436,523) (329,777) Death after retirement. If retirees live shorter than expected, there is a gain. If retirees live longer than assumed, there is a loss. (488,586) 744,522 (66,627) (136,493) (46,727) Defined Contribution Plan administrative expenses. If there is more expense than participant income, there is a loss. 0 0 0 0 (49) Final plan reselection. If the account value from defined contribution accounts is greater than the reestablished defined benefit account balance, there is a gain. 13,373 (1,061) 14,538 821 2,951 Gain (or loss) during year from financial experience 180,979 (279,058) (17,801,379) (893,999) 5,234,471 Nonrecurring items adjustment 0 0 0 0 0 Composite gain (or loss) during the year $ 180,979 $ (279,058) $ (17,801,379) $ (893,999) $ 5,234,471

Solvency Test, 2002–2011 (dollar amounts in thousands)

Accrued Liability for: (1) (2) (3) Active Retirees Active Members Valuation Member and (Employer-Financed Valuation Date Contributions Beneficiaries Portion) Assets* (1) (2) (3) 2002 $7,771,703 $32,639,291 $22,804,650 $48,958,824 100% 100% 37% 2003 $8,155,685 $34,938,341 $22,842,331 $48,899,215 100% 100% 25% 2004 $8,600,068 $37,870,700 $23,396,658 $52,253,799 100% 100% 25% 2005 $8,940,971 $40,937,540 $23,938,603 $53,765,570 100% 100% 16% 2006 $9,284,076 $44,219,489 $23,867,459 $58,008,050 100% 100% 19% 2007 $9,563,124 $47,526,142 $24,037,375 $66,671,511 100% 100% 40% 2008 $9,737,926 $51,874,103 $25,820,319 $69,198,008 100% 100% 29% 2009 $10,295,816 $54,909,046 $26,236,093 $54,902,859 100% 81% 0% 2010 $10,641,167 $57,754,654 $26,324,848 $55,946,259 100% 78% 0% 2011 $10,907,611 $62,441,600 $25,416,993 $58,110,495 100% 76% 0% *Excludes health care assets. Years prior to 2008 included the health care assets in prior disclosures, but have been restated to exclude these assets.

Portion of Accrued Liabilities Covered by

Valuation Assets

Actuarial


Summary of Benefit and Contribution Provisions — Defined Benefit Plan

Eligibility for Membership

Immediate upon commencement of employment.

Service Retirement

Eligibility

Any age with 30 years of service, age 55 with 25 years of service, or age 60 with five years of service. Members retiring before age 65 with less than 30 years of service credit receive a percentage reduc-tion in benefit amounts.

Amounts

Annual amount equal to the greater of (a) 2.2% of final average salary for the three highest paid years, multiplied by years of total Ohio service credit, or 2.5% of final average salary for the three highest paid years if the member has 35 or more years of contributing service credit, multiplied by years of total service credit — except that for years of Ohio contributing service credit in excess of 30 the following formula percentage will apply:

or (b) $86 multiplied by years of service credit, and adjusted by the following percentage:

Annual salary is subject to the limit under Section 401(a)(17).

Maximum benefit — The lesser of: (a) 100% of average annual salary for the three highest paid years, or (b) the limit as established by Section 415 of the Internal Revenue Code.

Minimum benefit — The sum of the annuity provided by: (a) the member’s contribution with interest, (b) a pension equal to the annuity, and (c) an additional pension of $40 multiplied by the number of years of prior and military service.

Disability Retirement

Eligibility

A member may qualify if the following criteria are met: membership before July 30,1992, and election of this benefit; completion of five or more years of service; under age 60; and incapacitated for the per-formance of regular job duties for at least 12 months.

Amount

(1) Annuity with a reserve equal to the member’s accumulated contributions, plus

(2) The difference between (1) (noted above) and the greater of 2% of the average salary during the three highest paid years times total service plus years and months from date of disability to age 60, or $86 times total service plus years and months from date of disability to age 60. Maxi-mum allowance is 75% of final average salary. Minimum allowance is 30% of final average salary.

Disability Allowance

Eligibility

A member may qualify if the following criteria are met: membership after July 29,1992, or member-ship on or before July 29,1992, and election of this benefit; completion of five or more years of service; and incapacitated for the performance of regular job duties for at least 12 months.

Amount

The amount is 2.2% of the average salary during the three highest paid years times total service. Maximum allowance is 60% of final average salary. Minimum allowance is 45% of final average salary. The disability allowance payment terminates at age 65 (or later if payment begins after age 60). After termination of the disability allowance, the member may apply for service retirement.

Years of Attained Ohio Percentage of Age Service Credit Base Amount 58 25 75% 59 26 80% 60 27 85% 61 88% 28 90% 62 91% 63 94% 29 95% 64 97% 65 30 or more 100%

Year Percentage 31 2.5% 32 2.6% 33 2.7% 34 2.8% 35 2.9% 36 3.0% 37 3.1% 38 3.2% 39 3.3%

Actuarial


Death After Retirement

Lump-sum payment of $1,000 upon death after service or disability retirement.

Survivor Benefits

Eligibility

A member may qualify for this benefit after at least 1-1/2 years of credit for Ohio service with at least 1/4 year of such service in the 2-1/2 years preced-ing death; or upon death of a disability retiree.

Amount

If a member was eligible for retirement, a spouse or other sole dependent beneficiary may elect to receive Option 1 benefits in lieu of return of contributions. If a member was not eligible for retirement, qualified beneficiaries may elect to receive dependent-based benefits in lieu of return of contributions (see chart below) or service-based benefits, which provide a minimum benefit of a percentage of final average salary based on years of credited service ranging from 29% with 20 years of service to 60% with 29 years of service.

Qualified beneficiaries are spouse, dependent chil-dren and/or dependent parents age 65 or older.

Lump-Sum Withdrawal Option

In lieu of any other pension or survivor benefits, a member who leaves the system can receive his or her member contributions with interest in a lump sum according to the following schedule:

The board has the authority to modify the interest credited to member contributions.

Optional Forms of Benefit

Option 1 — 100% joint and survivorship. Reduced retirement allowance payable to the member and continuing for life to the member’s sole benefi-ciary (named at retirement) after the member’s death.

Option 2 — A joint and survivorship annuity pay-able during the lifetime of the member, with the member’s sole beneficiary (named at retirement) to receive some other portion of the member’s annuity after the member’s death.

Option 3 — The member’s reduced retirement allowance provided under Option 1 or Option 2 paid for life to the member’s sole beneficiary (named at retirement) after the member’s death. In the event of the death of the sole beneficiary or termination of marriage between the retiree and the sole beneficiary, the retiree may elect to return to a single lifetime benefit equivalent, available for an actuarially computed charge as determined by the Retirement Board. In the case of termination of marriage, the election may be made with the writ-ten consent of the beneficiary or by court order.

Option 4 — A life annuity payable during the lifetime of the member with a guarantee that, upon the member’s death before the expiration of a certain period, the benefit will continue for the remainder of such period to the beneficiary. Joint beneficiaries may receive the present value of any remaining payments in a lump-sum settlement. If all beneficiaries die before the expiration of the certain period, the present value of all remaining payments is paid to the estate of the beneficiary last receiving benefits.

% of Average Number of Annual Salary Minimum Qualified for Three Highest Annual Dependents Paid Years Benefit 1 25% $ 1,152 2 40% 2,232 3 50% 2,832 4 55% 2,832 5 or more 60% 2,832

Credited Service Lump-Sum Amount Less than three years Member contributions with 2% interest Three or more years Member contributions but less than five years with 3% interest Five or more years 150% of member contributions with 3% interest

Actuarial


Option 5 — A plan of payment established by the Retirement Board combining any of the features of Options 1, 2 and 4.

Partial Lump-Sum Option Plan (PLOP) — A lump-sum payment totaling between six and 36 times the member’s monthly retirement benefit value. Lifetime monthly benefit payments then start at a reduced amount to account for the sum taken up front in a single payment.

Refund of Contributions

A member’s contributions with interest are refunded upon termination of employment where no other benefit is payable. Upon death after retirement or upon death of a survivor in receipt of benefits, the member’s accumulated contributions, less payments made, are returned to the desig-nated beneficiary.

Cost-of-Living Benefits

The basic benefit is increased each year by 3% of the original base benefit.

Health Care

Retirees, their spouse and dependents have access to a medical expense health care plan as may be offered by the Retirement Board and which is sub-ject to changes in terms and conditions from time to time.

Contribution

By members: 10% of salary.

By employers: 14% of salaries of their employees who are members.

Summary of Benefit and Contribution Provisions — Combined Plan


New members hired on or after July 1, 2001, may elect in writing to participate in the Combined Plan.

Service Retirement

Eligibility

Age 60 with five years of service.

Amount

The balance in the member’s defined contribu-tion account plus an annual amount equal to 1% of final average salary for the three highest paid years multiplied by years of total Ohio service credit.

Annual salary is subject to the limit under Section 401(a)(17) of the Internal Revenue Code.

Vesting

Eligibility

Completion of five years of service for the defined benefit portion. Member contributions and earn-ings are 100% vested at all times.

Amount

A member who terminates with five or more years of service credit can receive the actuarial equiva-lent present value of the defined benefit formula. Before age 50, a withdrawal must include both the defined benefit and defined contribution portions of the account.

Early Retirement

Eligibility

Before age 60 with five years of service.

Amount

The normal retirement benefit commencing at age 60. At age 50 or after, a member who elects to withdraw the full value of his or her defined contribution account may receive the withdrawal value of the formula benefit in a single sum, or leave the formula benefit on account for a benefit payable at age 60. The member may withdraw the defined benefit portion of the account only if he or she is also withdrawing the defined contribu-tion account.

Late Retirement

Eligibility

After age 60 with five years of service.

Amount

The formula benefit described in the service retirement section based on service credit and final average salary at termination without any actuarial adjustment.

Actuarial


Disability Benefits

Eligibility

Completion of five or more years of service and incapacitated for the performance of regular job duties for at least 12 months.

Amount

Members have the option of receiving disability benefits. All contributions and investment gains in the member’s defined contribution account are used to fund the benefit. At age 65, the disability benefit converts to a service retirement benefit with a 2.2% formula. Alternatively, the member’s defined contribution account is available upon termination of employment.

Survivor Benefits

Eligibility

Upon death after at least 1-1/2 years of credit for Ohio service with at least 1/4 year of such service in the 2-1/2 years preceding death or upon death of a disability retiree.

Amount

Qualified surviving members have the option of receiving survivor benefits paid as an annu-ity. All contributions and investment gains in the member’s defined contribution account are used to fund the benefit. If a member had 30 years of service, was age 55 with 25 years of service or age 60 with five years of service, the spouse or other sole dependent beneficiary may elect to receive an Option 1 benefit in lieu of return of contributions.

If a member did not meet the eligibility require-ments described above, qualified beneficiaries may elect to receive the following benefits in lieu of return of contributions.

Service-based benefits provide a minimum benefit of a percentage of final average salary based on years of credited service ranging from 29% with 20 years of service to 60% with 29 years of service.

Alternatively, the member’s defined contribution account is available.

Qualified beneficiaries are spouse, dependent chil-dren and/or dependent parents age 65 or older.

Optional Forms of Payment of Defined Benefit Portion

A lump sum of the actuarial equivalent of the defined benefit formula benefit. If a member with-draws the defined contribution account before age 50, the formula benefit is paid in a lump sum.

Joint and Survivorship Options — Options 1 through 5 described in the Defined Benefit Plan provisions are available, as well as the PLOP. All alternative forms of payment are the actuarial equivalent of the Single Life Annuity benefit pay-able at age 60.

Optional Forms of Payment of Member’s Defined Contribution Account

The actuarial equivalent of the member’s defined contribution account can be paid on or after age 50 as a lifetime annuity. Options 1 through 5, described in the Defined Benefit Plan provisions, are also available. The monthly annuity must be $100 or more to receive the member’s defined con-tribution account in the form of an annuity.

The vested amount of the member’s defined contribution account upon termination of employ-ment can be paid as a single lump sum. If a member takes a lump sum of the defined benefit formula benefit, the member must simultaneously withdraw the lump-sum value of the member’s defined contribution account in a single lump sum.


Not available on the service retirement benefit. For disability and survivor benefits, the basic benefit is increased by 3% each year.

% of Average Number of Annual Salary Minimum Qualified for Three Highest Annual Dependents Paid Years Benefit 1 25% $ 1,152 2 40% 2,232 3 50% 2,832 4 55% 2,832 5 or more 60% 2,832

Actuarial


Health Care

Retirees, their spouse and dependents have access to a medical expense health care plan as may be offered by the Retirement Board and which is subject to changes in terms and conditions from time to time.

Contribution

By members: 10% of salary is deposited into the member’s defined contribution account.

By employers: 13.7% of salaries is used to fund the defined benefit formula and health care; 0.3% of salaries is used to fund administrative expenses for the Defined Contribution Plan.

Summary of Benefit and Contribution Provisions — Defined Contribution Plan


New members hired on or after July 1, 2001, may elect in writing to participate in the Defined Con-tribution Plan.

Service Retirement

Eligibility

Termination after age 50.

Amount

The balance in the member’s defined contribution account.

Vesting

Eligibility

Employer contributions and earnings on the member’s account are vested after the first anni-versary of membership. Member contributions and earnings are 100% vested at all times.

Amount


Early Retirement

Eligibility

Termination before age 50.

Amount


Disability Benefit

Not available. However, members who terminate employment may withdraw their account.

Survivor Benefits

Eligibility

Upon death.

Amount


Optional Forms of Payment

The actuarial equivalent of the member’s defined contribution account can be paid on or after age 50 as a lifetime annuity. Options 1 through 5, described in the Defined Benefit Plan provisions, are also available. The monthly annuity must be $100 or more to receive the member’s defined contribution account in the form of an annuity.


Not available.

Health Care

Not available.

Contribution

By members: 10% of salary is deposited into the member’s defined contribution account.

By employers: 10.5% of salary is deposited into the member’s defined contribution account; 3.5% of salaries is used to amortize the unfunded liability of the Defined Benefit Plan.

Actuarial


The objective of the statistical section is to provide financial statement users with historical perspective, context and detail to assist in using the information in the financial statements and the notes to the financial statements to better understand and assess STRS Ohio’s economic condition.

The schedules on Pages 64–65 show financial trend information that assists users in under-standing and assessing how STRS Ohio’s financial position has changed over time. The financial trend schedules presented are:

• Changes in Net Assets

• Net Assets by Plan

• Benefit Expenses by Type

Demographic and economic information begins on Page 66. This information is intended to assist users in understanding the environment in which STRS Ohio operates and to provide information that facilitates comparisons of financial statement information over time and among governments. The demographic and economic information presented are:

• Actuarial Funded Ratio and Funding Period

• Selected Funding Information — Defined Benefit Plan

• Number of Benefit Recipients by Type

• Summary of Active Membership Data

Operating information, which begins on , is intended to provide contextual information about STRS Ohio’s operation to assist in using financial statement information. The operating information presented is:

• Benefit Payments by Type

• Average Benefit Payments for Service Retirees

• Number of Reporting Employers by Type

• Principal Participating Employers

Statistical


Changes in Net Assets Years Ending June 30, 2002–2011 (in thousands)

Defined Benefit Plan

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Additions: Member contributions $ 815,339 $ 868,157 $ 967,234 $ 969,226 $ 987,900 $ 1,002,876 $ 1,017,720 $ 1,041,248 $ 1,066,483 $ 1,081,958 Employer contributions 817,742 1,164,734 1,206,439 1,232,317 1,255,053 1,272,559 1,305,027 1,347,741 1,374,327 1,379,104 Investment income (loss) (4,039,314) 857,081 7,685,568 6,101,662 7,550,742 12,693,905 (3,926,797) (14,371,713) 6,641,516 11,925,835 Other 193 21,486 20,777 20,488 18,974 36,313 37,945 35,324 39,857 45,910Total additions (2,406,040) 2,911,458 9,880,018 8,323,693 9,812,669 15,005,653 (1,566,105) (11,947,400) 9,122,183 14,432,807 Deductions: Benefit payments 2,638,953 2,845,503 3,108,753 3,383,605 3,684,385 4,007,705 4,338,617 4,613,751 4,900,418 5,244,407 Refunds 83,859 76,453 99,538 110,018 121,290 128,587 133,832 121,863 117,751 153,243 Administrative expenses 69,991 69,085 62,768 59,093 63,398 60,002 59,467 58,679 59,320 58,860Total deductions 2,792,803 2,991,041 3,271,059 3,552,716 3,869,073 4,196,294 4,531,916 4,794,293 5,077,489 5,456,510 Net increase (decrease) (5,198,843) (79,583) 6,608,959 4,770,977 5,943,596 10,809,359 (6,098,021) (16,741,693) 4,044,694 8,976,297Net assets held in trust, beginning of year 50,080,968 44,882,125 44,802,542 51,411,501 56,182,478 62,126,074 72,935,433 66,837,412 50,095,719 54,140,413Net assets held in trust, end of year $44,882,125 $44,802,542 $51,411,501 $56,182,478 $62,126,074 $72,935,433 $66,837,412 $50,095,719 $54,140,413 $63,116,710

Post-Employment Health Care Plan

Additions: Employer contributions $ 380,437 $ 88,587 $ 91,589 $ 93,066 $ 94,610 $ 96,287 $ 98,342 $ 101,221 $ 103,415 $ 103,694 Health care premiums 79,590 103,913 156,970 188,835 189,432 201,537 214,700 225,627 222,316 222,130 Investment income (loss) (267,250) 54,800 470,125 361,600 433,999 713,400 (217,501) (778,556) 348,311 608,969 Government reimbursements 0 0 0 0 17,947 36,312 36,915 37,956 38,156 70,556Total additions 192,777 247,300 718,684 643,501 735,988 1,047,536 132,456 (413,752) 712,198 1,005,349 Deductions: Health care provider payments 434,287 456,214 425,709 443,615 490,122 503,407 540,493 558,344 592,416 604,456 Administrative expenses 3,909 3,903 3,763 3,879 3,204 3,027 2,913 3,349 2,523 2,502Total deductions 438,196 460,117 429,472 447,494 493,326 506,434 543,406 561,693 594,939 606,958 Net increase (decrease) (245,419) (212,817) 289,212 196,007 242,662 541,102 (410,950) (975,445) 117,259 398,391Net assets held in trust, beginning of year 3,255,940 3,010,521 2,797,704 3,086,916 3,282,923 3,525,585 4,066,687 3,655,737 2,680,292 2,797,551Net assets held in trust, end of year $ 3,010,521 $ 2,797,704 $ 3,086,916 $ 3,282,923 $ 3,525,585 $ 4,066,687 $ 3,655,737 $ 2,680,292 $ 2,797,551 $ 3,195,942

Defined Contribution Plan

Additions: Member contributions $ 11,571 $ 18,774 $ 23,612 $ 28,641 $ 33,070 $ 36,709 $ 40,829 $ 44,490 $ 46,059 $ 47,935 Employer contributions 6,536 10,136 13,147 16,270 19,280 21,645 24,471 26,873 27,359 28,205 Investment income (loss) (1,469) 2,677 11,741 13,560 19,830 37,023 (31,120) (59,251) 39,157 88,131 Transfers between retirement plans 19,792 0 0 0 0 (15,845) (14,399) (14,644) (16,580) (16,264)Total additions 36,430 31,587 48,500 58,471 72,180 79,532 19,781 (2,532) 95,995 148,007 Deductions: Refunds 218 1,076 2,656 4,533 5,918 6,407 9,086 7,427 9,230 12,777 Administrative expenses 3,225 931 849 733 491 358 240 256 (35) (160)Total deductions 3,443 2,007 3,505 5,266 6,409 6,765 9,326 7,683 9,195 12,617 Net increase (decrease) 32,987 29,580 44,995 53,205 65,771 72,767 10,455 (10,215) 86,800 135,390Net assets held in trust, beginning of year (2,533) 30,454 60,034 105,029 158,234 224,005 296,772 307,227 297,012 383,812Net assets held in trust, end of year $ 30,454 $ 60,034 $ 105,029 $ 158,234 $ 224,005 $ 296,772 $ 307,227 $ 297,012 $ 383,812 $ 519,202

Statistical


Benefit Expenses by TypeYears Ending June 30, 2002–2011 (in thousands)

Fiscal Service Disability Survivor Supplemental Year Retirement Benefits Benefits Benefit Other Total 2002 $2,395,318 $168,704 $69,214 $0 $5,717 $2,638,953 2003 $2,588,800 $175,620 $73,680 $0 $7,403 $2,845,503 2004 $2,840,334 $182,889 $77,089 $0 $8,441 $3,108,753 2005 $3,106,371 $187,426 $81,589 $0 $8,219 $3,383,605 2006 $3,393,968 $193,329 $86,023 $0 $11,065 $3,684,385 2007 $3,708,919 $198,581 $90,092 $0 $10,113 $4,007,705 2008 $4,029,937 $201,949 $94,167 $0 $12,564 $4,338,617 2009 $4,299,310 $204,939 $99,139 $0 $10,363 $4,613,751 2010 $4,579,805 $205,989 $103,114 $0 $11,510 $4,900,418 2011 $4,908,718 $207,245 $113,531 $0 $14,913 $5,244,407

Net Assets by Plan Years Ending June 30, 2002–2011 (in thousands)

Fiscal Defined Benefit Post-Employment Defined Contribution Total Year Plan Health Care Plan Plan Net Assets 2002 $44,882,125 $3,010,521 $30,454 $47,923,100 2003 $44,802,542 $2,797,704 $60,034 $47,660,280 2004 $51,411,501 $3,086,916 $105,029 $54,603,446 2005 $56,182,478 $3,282,923 $158,234 $59,623,635 2006 $62,126,074 $3,525,585 $224,005 $65,875,664 2007 $72,935,433 $4,066,687 $296,772 $77,298,892 2008 $66,837,412 $3,655,737 $307,227 $70,800,376 2009 $50,095,719 $2,680,292 $297,012 $53,073,023 2010 $54,140,413 $2,797,551 $383,812 $57,321,776 2011 $63,116,710 $3,195,942 $519,202 $66,831,854

Statistical


Selected Funding Information — Defined Benefit Plan 2002–2011

Member As of Contribution Normal Unfunded Actuarial Total Interest Rate Payroll Growth July 1 Rate Cost Health Care Accrued Liability Employer Rate Assumption Assumption 2002 9.30% 6.02% 1.00% 6.98% 14.00% 7.75% 4.50% 2003 10.00% 4.89% 1.00% 8.11% 14.00% 8.00% 4.50% 2004 10.00% 4.90% 1.00% 8.10% 14.00% 8.00% 4.50% 2005 10.00% 4.90% 1.00% 8.10% 14.00% 8.00% 4.50% 2006 10.00% 4.82% 1.00% 8.18% 14.00% 8.00% 4.50% 2007 10.00% 4.81% 1.00% 8.19% 14.00% 8.00% 4.50% 2008 10.00% 4.24% 1.00% 8.76% 14.00% 8.00% 3.50% 2009 10.00% 4.34% 1.00% 8.66% 14.00% 8.00% 3.50% 2010 10.00% 4.30% 1.00% 8.70% 14.00% 8.00% 3.50% 2011 10.00% 3.98% 1.00% 9.02% 14.00% 8.00% 3.50%

Actuarial Funded Ratio and Funding Period 2002–2011 (dollar amounts in thousands)

At Actuarial Value Actuarial Accrued Unfunded Actuarial Funded Funding July 1 of Assets Liability Accrued Liability Ratio Period 2002 $48,958,824 $63,215,643 $14,256,819 77.4% 39.0 Yrs. 2003 $48,899,215 $65,936,357 $17,037,142 74.2% 42.3 Yrs. 2004 $52,253,798 $69,867,425 $17,613,627 74.8% 42.2 Yrs. 2005 $53,765,570 $73,817,114 $20,051,544 72.8% 55.5 Yrs. 2006 $58,008,050 $77,371,024 $19,362,974 75.0% 47.2 Yrs. 2007 $66,671,511 $81,126,642 $14,455,131 82.2% 26.1 Yrs. 2008 $69,198,008 $87,432,348 $18,234,340 79.1% 41.2 Yrs. 2009 $54,902,859 $91,440,955 $36,538,096 60.0% Infinite Yrs. 2010 $55,946,259 $94,720,669 $38,774,410 59.1% Infinite Yrs. 2011 $58,110,495 $98,766,204 $40,655,709 58.8% Infinite Yrs.

Number of Benefit Recipients by Type 2002–2011

Beneficiaries Receiving Service Disability Optional Survivor As of July 1 Retirement Benefits Allowances Benefits Total 2002 86,666 6,498 6,623 5,513 105,300 2003 89,257 6,552 6,885 5,600 108,294 2004 92,574 6,531 7,079 5,669 111,853 2005 95,843 6,514 7,314 5,724 115,395 2006 99,248 6,588 7,574 5,774 119,184 2007 102,771 6,480 7,859 5,824 122,934 2008 106,099 6,417 8,151 5,839 126,506 2009 109,031 6,340 8,387 5,901 129,659 2010 112,483 6,104 8,619 5,897 133,103 2011 117,138 6,028 9,012 5,910 138,088

Employer Contribution Rate

Statistical


Summary of Active Membership Data 2002–2011 (dollars in thousands)

Defined Benefit Plan

Females Males Total As of Active Annual Average Average Active Annual Average Average Active Annual Average Average July 1 Members Salaries Age Service Members Salaries Age Service Members Salaries Age Service

2002 123,198 $5,312,351 43.37 12.56 52,792 $2,674,763 44.54 13.70 175,990 $7,987,114 43.72 12.902003 123,850 $5,567,951 43.03 12.52 52,862 $2,758,722 44.11 13.41 176,712 $8,326,673 43.35 12.782004 123,320 $5,738,523 43.22 12.65 52,034 $2,787,446 44.21 13.38 175,354 $8,525,969 43.51 12.872005 121,940 $5,832,249 43.37 12.80 50,738 $2,787,043 44.36 13.42 172,678 $8,619,292 43.66 12.982006 121,106 $5,937,660 43.45 12.85 49,923 $2,808,086 44.38 13.33 171,029 $8,745,746 43.72 12.992007 120,641 $6,058,709 43.50 12.84 49,201 $2,829,219 44.41 13.21 169,842 $8,887,928 43.76 12.952008 120,514 $6,176,798 44.05 13.12 48,500 $2,837,340 44.95 13.37 169,014 $9,014,138 44.31 13.192009 121,544 $6,402,337 43.98 13.09 48,763 $2,909,210 44.90 13.18 170,307 $9,311,547 44.24 13.122010 122,730 $6,509,962 43.97 12.89 48,609 $2,921,391 44.81 13.01 171,339 $9,431,353 44.21 12.922011 123,721 $6,481,816 43.67 12.38 49,562 $2,914,809 44.59 12.42 173,283 $9,396,625 43.94 12.39

Combined Plan


2002 1,973 $58,023 36.21 2.39 594 $17,997 39.94 2.22 2,567 $76,020 37.07 2.352003 2,474 $75,715 35.80 2.41 758 $23,449 38.83 2.18 3,232 $99,164 36.51 2.352004 2,833 $91,090 35.85 2.82 876 $29,345 38.99 2.55 3,709 $120,435 36.59 2.762005 3,081 $104,158 36.13 3.28 933 $33,750 39.22 3.02 4,014 $137,908 36.85 3.222006 3,144 $112,499 36.60 3.76 892 $36,155 39.81 3.68 4,036 $148,654 37.31 3.742007 3,342 $124,417 36.90 4.16 926 $39,497 40.12 4.04 4,268 $163,914 37.60 4.132008 3,387 $132,008 37.91 4.91 926 $41,416 40.86 4.79 4,313 $173,424 38.54 4.882009 3,528 $145,617 38.46 5.39 972 $45,537 41.24 5.22 4,500 $191,154 39.06 5.352010 3,518 $154,180 38.98 6.08 985 $47,821 42.11 5.80 4,503 $202,001 39.67 6.022011 3,611 $163,273 39.51 6.59 1,003 $49,825 42.30 6.29 4,614 $213,098 40.11 6.53

Total Active Membership


2002 125,171 $5,370,374 43.25 12.40 53,386 $2,692,760 44.49 13.57 178,557 $8,063,134 43.62 12.752003 126,324 $5,643,666 42.89 12.32 53,620 $2,782,171 44.04 13.25 179,944 $8,425,837 43.23 12.602004 126,153 $5,829,613 43.05 12.43 52,910 $2,816,791 44.12 13.20 179,063 $8,646,404 43.37 12.662005 125,021 $5,936,407 43.20 12.56 51,671 $2,820,793 44.27 13.23 176,692 $8,757,200 43.51 12.762006 124,250 $6,050,159 43.45 12.85 50,815 $2,844,241 44.30 13.16 175,065 $8,894,400 43.58 12.772007 123,983 $6,183,126 43.32 12.60 50,127 $2,868,716 44.33 13.04 174,110 $9,051,842 43.61 12.732008 123,901 $6,308,806 43.88 12.90 49,426 $2,878,756 44.87 13.21 173,327 $9,187,562 44.16 12.992009 125,072 $6,547,954 43.82 12.87 49,735 $2,954,747 44.83 13.02 174,807 $9,502,701 44.11 12.922010 126,248 $6,664,142 43.83 12.70 49,594 $2,969,212 44.75 12.86 175,842 $9,633,354 44.09 12.742011 127,332 $6,645,089 43.55 12.22 50,565 $2,964,634 44.54 12.29 177,897 $9,609,723 43.84 12.24

Note: Members enrolled in STRS Ohio’s Defined Contribution Plan and reemployed retirees are not reflected in the above figures.

Statistical


Benefit Payments by Type As of July 1, 2011

Annual Average Age Last Allowance Annual Birthday Number ( in thousands) Allowance Service Retirees Under 60 10,188 $ 514,508 $ 50,501 60–64 27,823 1,358,885 48,840 65–69 25,702 1,145,067 44,552 70–74 18,909 763,258 40,365 75–79 13,806 491,856 35,626 Over 79 20,710 587,690 28,377 Total 117,138 $4,861,264 $ 41,500 Beneficiaries Receiving Optional Allowances Under 60 435 $ 10,522 $ 24,189 60–64 456 14,155 31,042 65–69 796 25,275 31,752 70–74 1,119 31,691 28,321 75–79 1,496 37,973 25,383 Over 79 4,710 94,802 20,128 Total 9,012 $ 214,418 $ 23,793 Survivor Benefit Beneficiaries Under 60 1,754 $ 25,025 $ 14,267 60–64 786 19,041 24,225 65–69 830 18,682 22,508 70–74 700 14,499 20,713 75–79 622 11,928 19,177 Over 79 1,218 20,540 16,864 Total 5,910 $ 109,715 $ 18,564 Disability Beneficiaries Under 60 1,636 $ 59,197 $ 36,184 60–64 1,479 55,086 37,245 65–69 1,111 40,456 36,414 70–74 690 23,076 33,444 75–79 494 15,116 30,599 Over 79 618 15,043 24,342 Total 6,028 $ 207,974 $ 34,501 Grand Total 138,088 $5,393,372 $ 39,057

Statistical


Average Benefit Payments for Service Retirees, 2002–2011

Years of Service Credit Average/ 5–9 10–14 15–19 20–24 25–29 >=30 Total 2002 Average monthly benefit $321 $706 $1,128 $1,765 $2,188 $3,472 $2,910 Average final average salary $21,452 $33,672 $39,517 $50,993 $53,932 $58,872 $54,481 Number of recipients 248 202 203 243 548 3,776 5,220 2003 Average monthly benefit $301 $672 $1,182 $1,710 $2,232 $3,668 $3,003 Average final average salary $20,067 $30,751 $42,129 $48,616 $55,395 $62,109 $56,242 Number of recipients 259 208 214 275 459 3,439 4,854 2004 Average monthly benefit $317 $704 $1,175 $1,803 $2,365 $3,815 $3,149 Average final average salary $22,873 $34,369 $43,591 $52,442 $58,161 $63,780 $58,440 Number of recipients 261 223 231 261 476 3,704 5,156 2005 Average monthly benefit $392 $746 $1,187 $1,904 $2,392 $4,003 $3,419 Average final average salary $29,291 $33,986 $42,990 $54,611 $58,866 $66,075 $61,763 Number of recipients 188 137 225 272 516 4,075 5,413 2006 Average monthly benefit $399 $859 $1,370 $1,911 $2,537 $4,068 $3,505 Average final average salary $27,055 $42,280 $50,235 $54,608 $62,027 $67,315 $63,649 Number of recipients 156 159 247 298 577 4,379 5,816 2007 Average monthly benefit $425 $830 $1,279 $1,978 $2,578 $4,235 $3,592 Average final average salary $31,415 $39,215 $47,769 $57,835 $64,025 $69,713 $65,417 Number of recipients 196 177 277 360 622 4,605 6,237 2008 Average monthly benefit $406 $831 $1,352 $2,024 $2,600 $4,309 $3,611 Average final average salary $30,224 $40,804 $49,447 $60,033 $64,959 $71,113 $66,378 Number of recipients 200 182 314 366 551 4,288 5,901 2009 Average monthly benefit $431 $822 $1,382 $2,193 $2,697 $4,497 $3,754 Average final average salary $28,623 $38,507 $51,590 $64,199 $67,168 $73,260 $68,136 Number of recipients 199 158 288 310 429 3,698 5,082 2010 Average monthly benefit $455 $934 $1,349 $2,030 $2,780 $4,680 $3,887 Average final average salary $30,030 $46,509 $50,407 $59,781 $67,794 $74,810 $69,522 Number of recipients 174 155 282 359 543 3,833 5,346 2011 Average monthly benefit $480 $992 $1,540 $2,377 $2,890 $4,689 $3,937 Average final average salary $33,330 $46,727 $55,904 $68,932 $70,775 $75,724 $71,591 Number of recipients 171 201 365 438 685 4,595 6,455

Statistical


Number of Reporting Employers by Type, 2002–2011

County Exempted County Fiscal City Local Educational Village Joint Colleges Boards of Year School School Service School Vocational & Developmental Community Ended Districts Districts Centers Districts Schools Universities Disabilities Schools Other Total 2002 194 369 60 49 49 37 77 101 8 944 2003 194 369 60 49 49 37 76 130 8 972 2004 194 369 60 49 49 37 76 142 9 985 2005 194 370 60 49 49 37 74 219 9 1,061 2006 194 369 60 49 49 37 73 246 9 1,086 2007 194 369 60 49 49 36 73 255 9 1,094 2008 194 370 59 49 49 36 73 272 9 1,111 2009 194 370 58 49 49 36 71 280 10 1,117 2010 194 370 57 49 49 36 69 273 10 1,107 2011 194 370 56 49 49 36 69 291 10 1,124

Principal Participating Employers For the Year Ended June 30, 2011

Covered Prior Year Percentage Employer Members Rank of Membership

Columbus City Schools 6,198 1 2.32%The Ohio State University 5,685 3 2.12%Cleveland Municipal Schools 5,116 2 1.91%University of Cincinnati 3,249 7 1.21%Kent State University 3,130 8 1.17%Cincinnati City Schools 3,094 5 1.16%Akron City Schools 3,002 4 1.12%Cuyahoga Community College 2,736 9 1.02%Univerity of Akron 2,635 10 0.98%Toledo City Schools 2,602 6 0.97%All Others 230,256 86.02%Total Covered Members 267,703* 100.00%

*Covered members include any participant in STRS Ohio who made contributions through a reporting employer during the fiscal year. Part-time teachers working in multiple school districts are included within each school’s payroll data and, consequently, are reported more than once. Participating employers include every publicly funded school in Ohio employing a certified teacher. A complete listing of participating employers is available upon request. Years prior to the current year are not reflected since the participating employers do not change substantially from year to year.

Statistical

7150-143, 12/11/200

State Teachers Retirement System of Ohio275 E. Broad St., Columbus, OH 43215-3771 • 614.227.4090 • www.strsoh.org

88 East Broad Street, Fifth Floor, Columbus, Ohio 43215‐3506 Phone: 614‐466‐4514 or 800‐282‐0370 Fax: 614‐466‐4490

www.auditor.state.oh.us

STATE TEACHERS RETIREMENT SYSTEM OF OHIO

FRANKLIN COUNTY

CLERK’S CERTIFICATION This is a true and correct copy of the report which is required to be filed in the Office of the Auditor of State pursuant to Section 117.26, Revised Code, and which is filed in Columbus, Ohio.

CLERK OF THE BUREAU CERTIFIED JANUARY 19, 2012

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